Just for giggles on Monday of this week, I attempted to determine if it is REALLY reasonable for a local scuba store or a large scuba internet retailer to purchase this product and eliminate the middle-man in order to be able to reduce the price to that of a chain arts and crafts store. Here is what I found.....
I can purchase this Scribbles 3-D paint directly from the North American distributor. This product is branded under the name Duncan and is distributed by Duncan Industries in Fresno, California. This company is not only a direct retailer of arts and crafts supplies, but they also have a wholesale program to supply other independent and chain arts and crafts stores.
Like almost all wholesalers, they have some pretty specific requirements to purchase products from them. They require full financial statements, a rather detailed wholesaler application, and they require a letter of credit from your bank, regardless of the method of payment. Of course, if you are a new wholesale customer for them, they require personal guarantees from the owner or an officer, a step MANY owners of corporations are not willing to take.
For a scuba store, it appears that the Scribbles 3D paint would be the only thing that might interest me for my market and my customers. So, the minimum order size of $1,000 would need to be completely composed of this one product. The wholesale cost of the Scribbles 3D paint is $0.76 per bottle. Only case quantities are allowed, and each color comes in a master case of 96 bottles. To stock the minimum 4 colors that customers demand, and to meet the minimum order requirement of $1,000, I would need to order 14 cases, or 1,344 bottles. Of course, shipping from Fresno would also be added.
Now, for the label issue. The product comes labeled with the Scribbles 3D paint label, a marketing tool clearly designed to target the crafts/arts/fabric industry. To have a reasonable expectation of offering the product to the targeted scuba industry, re-branding and relabeling would be necessary. This is clearly what the current distributor choose to do. Assuming I could find a suitable brand name, at a minimum it would need to be registered with my state and there would be some cost to this. In addition, professional printing of reasonable, durable labels (exactly like is done with the current ScubaGoop product, would cost about $0.19 per label. Of course, then someone would need to apply all of the labels over the current label. But to satisfy some, it appears that the existing label would need to be removed. This might involve some type of registration of contents, maybe even some testing....I really don't know, as I have never engaged in this type of business.
The current distributor packaged this little bottle in a nice clam-shell heat activated package with a full color description card for proper display. If I were to do the same thing, the clam-shell package would cast about $550 per 2,500 pieces.....the minimum run I could find at any plastic house. The printed description cards would be about $0.18 each. These can be purchased in small quantities of about 1,500 each.
IN ONLY DIRECT COSTS, the wholesale price if this product is now up to about $1.35 each. But there are still two GIGANTIC issues........
General business liability insurance policies do not include consumer product liability coverage. This is REQUIRED to brand and market a product and my specific general liability insurance policy SPECIFICALLY precludes "branding" or "manufacture" of products without the product liability rider. Product liability insurance requires a rather large foxed premium, plus a percentage of your ENTIRE sales as additional premium. Adding a branded product would only be reasonable IF YOU ARE ALREADY in the branding and distribution business and already have the structure of such a policy in place. It would simply be silly to do this if you don't have the insurance substructure in place.
Then the final problem.....in the most recent 12 business months, I sold about 100 bottles of this product. At the minimum order requirement, assuming that the paint marker business stays the same, I would have a 13+ years supply on hand. If one color sold way better than another, I might be forced to reorder JUST A SINGLE COLOR one day, of course at the same minimums outlined.
So, what do I do? I pay someone else to do all of this, and I pay a higher wholesale price of about $3. For most people, this seems reasonable.
Phil Ellis
Discount Scuba Gear at DiveSports.com - Buy Scuba Diving Equipment & Snorkeling Equipment