Trade Discounts And Resale Certificates For Interior Designers: Everything You Need To Know
If you’re new to interior design or just starting your own business, you might be hearing the terms “to the trade”, “trade discounts”, and “resale certificate” a lot. You’re probably wondering what those terms mean and why they are important to running your interior design business.
Here are some common questions I get asked as an experienced interior designer:
What does “to the trade” mean in interior design?
How can you get trade discounts as an interior designer?
What are resale certificates?
How can you get a resale certificate?
Read on to learn exactly what trade discounts and resale certificates are, why they are important, and how you can use them to make a profit in your interior design business.
What Does “To-The-Trade” Mean In Interior Design?
To-the-trade means that you as a designer are purchasing furniture directly from a manufacturer instead of a retail furniture store. To-the-trade vendors offer special furniture trade discounts for interior designers (explained below).
How Do Furniture Trade Discounts Work?
Let’s look at a hypothetical situation to make this concept easier to understand:
Imagine a large warehouse in China that specializes in making couches. They have an entire facility with hundreds of employees and all they do is mass-produce couches.
A furniture trade company like Four Hands, for example, will contract manufacturing to this specialized couch making company and promise them lots of furniture orders to get bulk discounted pricing.
Let’s say the warehouse can manufacture the couch for $200, but they only agree to sell the couches at that price if Four Hands guarantees to purchase 20,000 couches per year. Four Hands needs to ensure that they can fulfill that contractual obligation to the overseas warehouse.
So, Four Hands creates special pricing on these couches to encourage designers and big box furniture showrooms, like Crate & Barrel, to order the couches. Four Hands does this by selling the couches at a reduced price and then providing a suggested resale price that they would use if the couch was sold directly to the end consumer - a homeowner.
For example, let’s say Four Hands decides that a specific couch would retail for $2,000 if going directly to a consumer. Four Hands would then decide that they are willing to sell the couch to their distributors - interior designers and big box stores - for $1,000.
Four Hands understands that it takes effort to sell the couch to a homeowner, so they offer the discount to compensate interior designers for their time and energy to source the product, maintain vendor relationships, and ultimately sell the product to a consumer.
Instead of hiring hundreds of marketing employees and salespeople, Four Hands has an army of independent business owners (interior designers and big box stores) who are willing to sell their product for them. This saves trade companies like Four Hands millions of dollars in salaries - so it’s a win-win for everyone!
So, why is this important for you? If Four Hands agrees to sell you a couch at a trade discount of $1,000, but they suggest that you sell it for $2,000 to a homeowner, that is $1,000 of profit that you can earn in product markup. Imagine the potential across all of the trade furniture you sell to your client.
How Can You Get Trade Discounts As An Interior Designer?
The good news is, trade discounts are built into the design process for professional interior designers - you just need to take advantage of it. Legally, you need to have a resale tax certificate and a receiving warehouse in order to make a purchase from a furniture trade company. Learn more about resale certificates below.
If you’re feeling completely lost or just want to make sure you’re doing it right, check out my group just for interior designers, Design Business Secrets+. I teach everything you need to know about trade vendors, determining product markups for profit, and all of the legal aspects that go on behind the scenes in your design process. Check it out today to feel more confident with trade discounts and resale certificates in your business!
What Are Resale Certificates?
Sticking with our hypothetical example from above, Four Hands and other trade vendors only sell their products to legal businesses who have resale tax certificates and a receiving warehouse. So not just anybody can go purchase a furniture item at a huge discount - it’s only for interior designers and big businesses like furniture showrooms. This prevents the average consumer from going directly to a manufacturer and cutting out the middleman (us, their designers) from the equation.
A resale tax certificate is a legal document that a business owner applies for and receives to show that they intend to purchase products and resell them. You will not need to pay sales tax on the products you purchase, but your client (who you resell the products to) will. The resale tax certificate allows you to collect sales tax from your client and then turn that tax money over to the government. You do not keep the sales tax, but you do keep the profit margin based on how you markup the item from the original purchase.
→ If you haven’t officially launched your own interior design business yet, check out this post for the top 5 reasons you should get started.
How Can You Get A Resale Certificate?
Resale certificate information varies by state. To get started, check out your state’s Department of Revenue website and look for “resale certificate” applications, sometimes called “exemption certificates”.
The Bottom Line With Trade Discounts
Trade discounts are essentially money that the manufacturer has decided to allow you to make as a commission for selling their products. You’re a salesperson for their products - they don’t have to hire a dedicated person to market their furniture. You purchase the product for a cheaper price than the consumer, turn around and sell it to your client, and keep the difference as profit! You are the one putting in the work to sell the product to your clients, and in return, you’re pricing the item in a way that provides you with a commission for selling the product.
Don’t give away money that was intended for YOU!
What To Do Next
If you’re still feeling stuck with this concept, or you want some additional help with pricing your resale furniture, you need to check out my group for interior designers called Design Business Secrets+. Inside of this exclusive group for new and aspiring designers, I share the proven systems and processes that I use in my own business - including trade vendors, how to determine the profit margin that you’re going to charge on trade furniture, and what that will look like in your individual business.
Joining today will get you one step closer to your dream life - earning 6-figures while working part-time as an interior designer!