Tuesday, September 29, 2009

The Economics of Selling Floss

I've been surveying my customers to see if they thought I should start selling embroidery/cross stitch floss in addition to the cross stitch designs I sell. The consensus was an overwhelming YES - especially if it could be sold at a discount like I do with my charts.

So - I spent most of two days looking into wholesale sources for floss. Well here's what I found:

1.) DMC floss is sold in boxes of 12 skeins per box.
2.) The WHOLESALE price (what I pay) of a box around $3.96 - which comes to .33 cents per skein.
3.) The SUGGESTED retail price for a skein of floss is .66 cents.

Wow - I never knew this. Most people tell me they get it at stores like Hobby Lobby or Michaels for anywhere from .35 - .50 cents - but it can be on sale for 4 for a dollar or even 5 for a dollar.

So - what does this mean?

Well - you're local LNS is probably making little or no money when they sell floss. .05 - .10 cents at most. So how can Michaels or Wal-Mart afford to have 5 for $1 sales? They buy 100's of thousands of boxes of floss as opposed to a couple of thousand a year (if that) by a small independent LNS store. So - they most likely get a GREAT deal, at far below wholesale. OR - they can afford to offer a great sale on a low-cost item like floss, because they know you'll most likely come in and purchase something else in addition to floss. This is called a 'loss-leader' and means they're willing to take a small loss on one item to gain a larger overall sale.

So - next time you have the luxury of visiting a local LNS - you'll have a better understanding and appreciation of why their prices on floss are what they are. I certainly appreciate it more!

Now - will I be selling floss? It's a tough call. Let's say I buy all the colors at .33 cents a skein and I offer it for .43 cents a skein. A customer shops at my store (yeah!!!) and purchases 3 skeins of floss for $1.29. I would make .30 cents - that's good!

But then the customer pays with a credit card or PayPal (which I encourage). The minimum fee for a transaction this size would be approximately .45 cents - so I would actually LOSE .15 cents.

This is why you're seeing the minimum shipping costs of $5.00 and minimum purchase amounts of $10 or more on many sites.

I am going to keep pursuing the issue - but I need suggestions. How can I offer this GREAT service to my customers, and not lose money doing it?

Regardless - I thought the whole story might enlighten you as it did me. I always figured floss cost the store maybe .10 or .15 cents and they were really marking it up - but not so.

You're ideas, comments, input etc. are GREATLY appreciated.

And so ends your lesson in economics for today! Thanks for reading! Carla


Anonymous said...

Since you deal in discontinued leaflets, why not consider selling discontinued floss items such as the Needlepaints which are being discontinued and are necessary for some of the older pamphlets, such as the Celtic Angel series by Mirabilia? There are some DMC colors which come close to the Needlepaints but for some customers (what I consider the purists) who use only what is used on the original patterns, this could be a benefit. The patterns are noted on the website of Told in a Garden as never being out of print, but the Needlepaints which are used on some of those patterns are being discontinued. Just a thought. I just ordered my first item from you and was very pleased. Keep up the good service.

Anonymous said...

Our local needle shop owner paid attention when WalMart cleared out all the DMC floss (and its fabric) and bought all of it for 10 cents a skein. When they found more, she went back and bought that. A number of WalMart stores in our state are cutting back on the sewing crafts. Another source of DMC floss for less, for those who can stock up on it.