Trade accounts are key to a design studio’s profitability. That, and strategic pricing models, as discussed with Lindsay Borchard during season one of the podcast. While working with trade manufacturers may feel more intimidating than shopping retail, it’s actually quite the opposite. Trade manufacturers give interior designers access to top-quality inventory at wholesale prices, allowing designers to increase their profit margins while providing clients with pieces they couldn’t find anywhere else.
Whether you’re just starting out or a well-established firm, utilizing trade accounts is an incredible opportunity for both your business and your clients. Today we’re focusing on why trade manufacturers matter, how to set up new accounts, and all the questions to ask in the process.
Interior Design Trade Accounts
How Trade Accounts Work
Here’s a little industry secret: most interior design studios cannot build a successful business model on design fees alone. Instead, designers incorporate wholesale—also known as trade accounts or trade manufacturers—into their sourcing process.
When first establishing their business, interior designers often work with national retail vendors (think Restoration Hardware, Pottery Barn, Wayfair, or Crate & Barrel) for a typical discount of around 10-20% off retail pricing. While this is a great starting point, wholesale is even better.
Trade manufacturers (examples include Arteriors, Four Hands, Visual Comfort, and Palecek) can secure interior designers anywhere from 30-60% off retail pricing. That percentage often increases as a designer hits higher status levels on their account. Aside from product discounts, some of the most significant advantages to working with trade manufacturers are the potential to double your revenue, gain key relationships within the design industry, and open growth opportunities down the line.
Why Wholesale Benefits Designers (+ Clients)
Trade accounts impact a studio's bottom line primarily through product mark-up. This terminology can make some people uneasy, but it's important to remember that a designer's end goal isn't to provide clients discounts; it's to run a profitable business.
There are many successful ways designers can handle product mark-up with their clients. Some designers sell the pieces to their clients at retail price (MSRP) and keep the discounted difference as a commission. Others split the discount with their clients, creating an added value for working with them while also maintaining a profit. Here's quick example:
Store A offers a 50% trade discount. The designer source a dining table that retails for $5000. The discount brings the table to $2500. At this point, the designers can sell the table to the client for $5000, keeping the $2500 as commission. Or, the designer can split the discount, bringing the table to $3750 and the commission to $1250.
There's no one-size-fits-all formula, and every designer must decide on the best model for their business. Just make sure to do the homework, run the numbers, and determine all policies upfront.
How to Get a Trade Account
To set up wholesale accounts, here’s what a designer will need to have in place:
Business License or Official Proof of Business
Business Bank Account
If a designer is new to the industry, these three elements should be secured before submitting applications. It’s also important to be selective about which vendors a designer applies to in the first place. Keep in mind that every brand has vastly different levels of product quality, customer service, company size, and business models. Designers should always vet potential trade partners to find the best fit for their business and clients.
Here are some questions to ask before opening an account:
What is Your Opening Order Amount?
Do You Have a Yearly Minimum?
Do You Have Different Pricing Levels?
What is Your Damage Rate?
Where Do Your Products Ship Out From?
Do You Drop Ship?
Who Handles Customer Service Issues?
What’s Your Return/Damage Policy and Procedures?
Where Are the Products Made?
Do You Sell to Big Box Retailers?
Lastly, remember to think quality over quantity. Start with a small group of trade manufacturers whose inventory best fits your business needs, and focus on establishing strong working relationships. It takes time to hit minimums and get a solid discount (generally speaking, 40-60% off retail) to make a higher profit margin. For designers who are just getting their feet wet in the world of trade manufacturers, start by opening accounts with one to three brands, and building up from there.
Sourcing products for your design work requires tons of research, involvement, and organization behind the scenes. But with some amazing trade relationships (plus a great warehouse receiving team!) in place, you’ll always be ready for what’s next.