Re: Questions

I have a few questions in regards to my product.

... I have found a manufacturer ... The first year cost, which includes
initial tooling and setup costs, is U.S. $2.36/unit.

***Make sure your customsbroker understands this...***

After first time costs the price falls to $1.79/unit. I'm just guessing
landed warehouse value to be around $3.50 (including duty, freight, cartage
and broker fees).

***Don't guess, get all the info at no cost in advance from a
customsbroker...***

The only other product on the market which has any kind of equivalence to
mine retails for around $26.99 with most retailers. My first question is, how
to I go about setting my wholesale price? If I simply set my price at $7.00
perhaps I will be "short changing" myself. At the same time I do not want to
set the price to high.

***The problem you mention below takes precedence to this problem...***


I have actually sent a few prototypes to retailers with a suggested wholesale
price of $8.00. I have received interest. One question I got, however, was
"what kind of warranty do you provide?" In one phone conversation I looked a
bit ignorant and I did not know what to tell the lady. How do I set a
warranty? Do I go back to the manufacturer and ask if they will give me a
warranty on any faulty product? I'm a little unclear on what I should do in
respect to warranty.

***this may be why the others are $30.00. The supplier quted you a price at
a certain quality, and say if your item is a watch, then the quality is the
95% of these watches will last at least 2 years. So, this means you can
warranty your watches for 2 years. What about the 5% that fail? Warranty is
a cost. For the 5% that fail, you will have to replace those. So, your
wholesale price has to assume that for every 100 watches you sell, you are
going to have to send five more at no charge to cover the failed watches. So
before you start, you figure this future cost into the present price of the
watches you sell.

Recall that your failure rate from supplier to you is five percent. You now
price the product to your supplier to cover the cost of a 100% warranty to
the customer. That is to say, we guarantee that 100% of the watches will be
fine, or we replace the watch at no charge. And as a practical matter, the
store is permitted to simply swap out any defective watches a customer
returns, and then sends the watches back to you (or gives them to the rep) to
warrant the claim for a defective watch.

So, find out what the defective rate will be on thses items. Add the cost of
covering those to your customers. The offer your custoemrs a 100% no hassle
warranty. Does this make sense.

Now please don't ask why the supplier wont just send 100% good watches.
Somestimes testiing for 100% costs way more that it is worth, so a level of
failure as a practical matter is tolerated. See US auto industry for details.

John


I have just produced roughly 30 prototypes, at a bit of an expense, so before
I send them off to retailers and potential sales representatives, I would
like to clarify my questions in regards to setting a wholesale price and what
to do in regards to the warranty.

I respect your advice and any help you could provide would be greatly
appreciated.

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