Sunday, May 12, 2013

Notes from the Other Side of the Counter: Part 5: Break It Down...

In the past few posts, I've discussed the initial meeting.  This installment continues on that theme and explores some of the more business-oriented details.

5.  Break it down.

Each business functions differently.  Besides establishing a good rapport and presenting your work, the first sit down should also outline how your businesses will function together.  Sometimes this won't actually happen until the second or third meeting, but it is imperative that it should happen before there are any business transactions.  Do not leave any work unless you fully know what you're getting into.

It's important to establish the parameters of your working relationship.  Is the shop owner looking to buy your work straight out or consign it?  If they are planning on purchasing things upfront to resell in their gallery, it's your job to supply the shop owner with how you operate your wholesale accounts.  Some commonly asked questions you'll receive are:  What is your MSRP?  ("MSRP" means, "manufacturer's suggested retrial price".)  What is your pricing structure?  (This information outlines what their wholesale price is, if there are any minimums, and if there are any further discounts depending on quantity, frequency, and dollar amount.)  One of the most common terms for a wholesale discount is "keystone", which means "half".  When one is transitioning from independently selling one's work on their own into selling to galleries and boutiques, it can sting at first to see half of the money disappear off the top.  But you have to remember that selling in this way is very different than selling on your own.  Do a little research and see what others who are selling similar products are doing and how they configure their pricing structures.  But keep it simple.  If it takes you longer than five minutes to explain your wholesale policies, it probably means they're too complicated.

Generally, when a shop owner purchases finished jewelry or fine art straight out, it means they are pretty confident that this product will sell for them.  They are making an investment, in the hopes of a return.  Usually this means that the product that they are trying to sell is something that is a must-have essential, is backed by a quality brand, or is in limited supply and they are filling a demand.  For smaller stores, stocking an entire inventory of products purchased outright isn't that easy.  The likelihood of one of the smaller boutiques buying merchandise from someone that they haven't worked with before and from someone who doesn't have a household name is slim.  It's a risk, particularly in this economy, that few are willing to take when there are consignment options available.

If a shop is considering selling your work through consignment, it's their responsibility to supply the details of how they operate their consignment system.  Every store is different.  Don't make assumptions.  Some questions you should ask:  What is the percentage breakdown?  If a promotion is offered through the store, who's percentage does it get taken out of?  How long is the agreement for?  When are payments distributed to artists?  What is the policy on lost, stolen, broken, or returned merchandise? If materials are to be sent, what is their policy and who covers the bill?  Are there any fees associated with showing in the space?

For us, it's simple.  We offer a 50/50 split.  If we offer a sale or promotion in the store, the money comes out of our cut.  Generally we work in spans of three month intervals with the option to terminate at any time from both/either the gallery and/or the artist at their discretion.  At the end of this time, there is also an option to renew.  In most cases, we send out reimbursement checks at the end of every month.  This insures that all the funds go through properly.  For us, if the loss is under $500 we'll cover the amount of the lost or stolen merchandise.  If it's over that, we'll contact our insurance company and the funds will be distributed when we receive them.  For broken pieces, if it's a simple fix, the repairs are covered in-house.  If they are substantial, they're sent back to the artist at the expense of the gallery and the artist will be compensated for the damaged merchandise.  We do not accept returns or exchanges.  For most postage, the artist is responsible to send their pieces to the gallery and we will cover the shipping back.  Should all the pieces sell, we send money to cover the entire shipping.  We do not charge additional fees for showing with us.

I did a lot of research on consignment agreements and we felt this was a fair policy to have.  It favors the artist, which as an artist myself, I felt strongly about.  I have heard that 50/50 is too high for some.  For us, our percentage covers overhead like utilities, rent, promotional materials, event supplies, general upkeep, and the time and effort that goes into promoting and selling the work.  Since we have a smaller space, available realty in the store is a premium.  This forces us to be highly selective and diligent in maintaining our standing arrangements.  (What the latter part of the previous sentence means is that we want all of our artists to be treated equally and we won't modify the percentages or policies.)

Having work out on consignment can be really rewarding.  For the shop owner, it allows them to constantly offer an ever-changing array of talents and it allows a store to try out a new artist with minimal risk.  For the artist, it can supplement their income, allow them to focus on creating instead of selling, and it can be a way of gaining exposure in new markets and areas.

There are other methods of working with stores and galleries, like trunk shows (either in person or by mail), sidewalk sales, and special events (like fairs and maker's markets).  Sometimes artists come together and form co-ops.  Each of these options have their own intricate differences and it is highly variable depending on the venue.

One of the simplest ways to spell everything out is through a contract.  Depending on the venue, they may or may not use them.  I personally don't care for them (in general), as they're just more pieces of paper to keep track of and our selection process for our artists is so thorough that by the time we've made our decision to work together, we're both fine with verbal agreements.  (Of course, should an artist want one, we'll always honor their decision and have one drafted up.)  Should a gallery refuse after a formal request, it should raise a red flag.  As with all contracts, read the fine print and if you don't understand it, get help.  Should it be drafted in overly complicated legalese, there are craft attorneys that can help decipher and make sense of the contract and keep an eye out for anything unusual.  An excellent craft lawyer that I highly recommend is Tammy Browning-Smith.  She specializes in intellectual property and is an artist's advocate.

Of course, over the years and from both sides, I've heard a lot of horror stories.  Most of them could have been prevented by breaking it down.

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