The Designer Explainer: What the heck is “Designer’s Net Price” Anyway?


Recently, I was reading through some comment boards on Houzz and came across a discussion about Designer’s Net Price. There seemed to be a general lack of understanding about how designers are charged for merchandise. This isn’t new, designers and decorators are often asked about “our price” and whether we pass it along to our clients. There are some clients who feel that if they are paying us a design fee, they are entitled to receive our price for products we specify and that if we don’t disclose that product purchased through us includes a profit, then somehow we’re double dipping. Or, that if they find the same product online for less, we have artificially inflated the price. One of the reasons there is always this difficult tug-of-war is because there isn’t one industry standard for pricing our services or products we sell. I wrote an article on the subject a few years ago. I need to write an update, though I did touch on it a little in this article on tips for hiring a decorator.

Before the wild west that is the internet, most high-end furnishing and fabrics manufacturer’s sold only “to the trade”. This means, simply, one either is a store, a designer or an architect. It created a sense of exclusivity and also meant these manufacturers – some of which are large and some are quite small – didn’t have to deal with selling to the masses. It meant less marketing, less infrastructure, no collecting sales taxes, no dealing with thousands or millions of demanding retail customers. They could run their business B to B, as it were (business to business). They left the end-user B to C (business to Consumer) transactions to storefronts and designers. As with any supply and demand scenario – buyers with high volume get bigger discounts (hello Amazon, Walmart, Homegoods, Macy’s, etc). Larger stores and design firms can often open direct accounts with manufacturer’s where they can purchase at a true wholesale price. Buyers will smaller volumes don’t get premium discounts. Often there are purchasing minimums, opening order minimums or annual minimums to achieve. And if they aren’t met, accounts can be closed.

Linda Merrill design Boston townhouse living room south end 02116 02332 designer's net price
Can you guess how many vendors/sources I used for this fully custom design project in the South End of Boston? Answer is at the end of the post.

In my case, I mostly purchase through showrooms at The Boston Design Center. These showrooms are either manufacturer owned showrooms, such as Kravet, Century Furniture, Stark Carpet, etc.  or they are showrooms which are privately owned and carry many different product lines. Either way, as an independent interior designer, I purchase from these showrooms at the designer’s net price, which is a percentage off of the MSRP (Manufactuer’s Suggested Retail Price), aka List price. In some cases, the manufacturer actually doesn’t put a list price because they don’t sell at retail at all. Where there is a designer’s net price and a stated List price, the percentage discount varies from product type (fabrics versus furniture) and of course each manufacturer can set their own designer’s net. Some categories such as cabinetry have extremely small margins (the difference between purchase cost and sale price), some categories are as much as 50% off.

Yes, fine, but why won’t you pass along your designer’s net price to me?

In fact, some designer’s do. But, since nothing is ever free, they are certainly charging a very high hourly rate or flat fee. Or, quite frankly, they are newbies who are afraid to charge what they need to be charging. Because, we simply cannot afford to charge a reasonable design fee and then attend to all the myriad decisions and processes that go into purchasing custom furnishings.

I thought an illustration would be a good way to show why designers are offered net pricing and why they don’t simply pass it along to their clients.

Where do the client’s come from?

It takes a lot of time, money and effort to gain a new client. If you have a storefront or showroom, there is obvious overhead (rent, staffing, etc). If you’re like me, a sole practitioner, I too have overhead. Equipment, software, sample books and materials, rent or space from the home dedicated to our businesses, etc. One thing we all have are marketing costs – websites, promotions, marketing, advertising, brochures, business cards and PR firms, etc. I’ve had a client take up to six years to actually move forward with a project after they started discussing it. And that’s not my only one. I had a client who interviewed me but hired the other guy, then came back over three years later. I had a client who I met at a wine tasting, but who’s boyfriend actually had an unused gift certificate of mine.  His sister had bought it several years before because she actually wanted to set us up. When I realized the woman at the wine tasting was dating him, I told her that he had a gift certificate and she should get him to use it. She ended up hiring me to do over her whole house. They broke up eventually and well after that he hired me to do some work for him. It can take a long, long time, is what I’m saying. (And no, he and I never dated.)

Steps, and steps, and steps from order to placement.

So, last year, I was working on a project for a lovely couple – we were doing their sitting room/home office. One of the pieces to be purchased through a showroom was this lovely custom upholstered ottoman. The fabric on the top was purchased via a different company (aka COM, Customer’s Own Material) while the fabric on the side was from the furniture company This required choosing the fabrics, the finish on the nailhead and the wood. The client’s approved the design and selections and I invoiced them for the product (with a markup) and the estimated shipping/freight fees (another hot button subject I’ll address at some point). Thus concluded the design portion of the proceedings and my client’s hands-on “work” until it was delivered. I was paid a design fee to pull together a look and specify all the products for the room, however…

My job was really only beginning. The animal print fabric had to be ordered from one company and shipped to the manufacturer of the ottoman. So, order, receive cutting for approval (CFA to be sure the actual goods matched the memo sample), paying the invoice and making sure it’s received by the manufacturer. Similarly, I placed an order through the showroom for the ottoman, paid the deposit and confirmed the order was accurate (the fabrics and the finishes on the nailhead and wood). I also continually checked in with my sales rep as the process moved ahead.

In due course, (6 -8 weeks), I was told that it was ready to ship up from North Carolina to my local receiver, so I paid the balance of the invoice. Then notified the receiver that it was coming and asked them to take a photo of it when it arrived so I could be sure it all looked right. Because no one wants surprises when the furniture comes off the truck at the client’s home with the wrong fabric on it! We also had a sofa from a different manufacturer (with fabric from yet another fabric house) coming in the same delivery. Throughout all this, I kept my clients updated on where things were.  Once it was received locally, I then had to organize the local delivery between the delivery company, my clients and myself. I always try to be on site when anything is delivered to be sure that it’s good to go. Because you just never know when something won’t be right.

And this time… something wasn’t right.

Linda Merrill decorative surroundings animcal print ottoman Duxbury Massachusetts 02332 designer's net price

This beautiful ottoman with the pretty animal print fabric – looked great. Until we noticed that for unknown reasons, whoever upholstered it had pieced together the fabric with seams, instead of simply using one large piece. The fabric piece I’d had sent was both wide enough and long enough to do so.

Linda Merrill decorative surroundings green animal print pattern mis-match Duxbury Massachusetts 02332 designer's net price

And, what was even worse, they hadn’t matched the pattern. It stuck out like a sore thumb. Ugh. Obviously, it needed to be fixed. Which meant several phone calls and emails to the showroom, photos sent and waiting to hear if they were going to make it right. I also had to wrangle a few more yards of fabric from the fabric house – who had just discontinued it. More phone calls. I was asked to put together a price to have it reupholstered locally  – which meant more phone calls and emails. I submitted the estimated cost. The manufacturer decided to have it picked up, shipped back to NC to be reupholstered.  More phone calls as I coordinated with my client and trucking company to pick it up. And have the new fabric shipped. And then send an invoice to the furniture company for the price of the fabric for reimbursement.

Linda Merrill decorative surroundings greeb animal print ottoman English arm sofa Duxbury Massachusetts 02332 designer's net price

More waiting, more communicating. And then repeat the whole re-delivery process. All told, I spent hours getting the piece fixed over the course of another two months. My clients, of course, had the annoyance of having to have the piece removed and wait for it again. But they never had to work to get it resolved. And, if the manufacturer hadn’t made good on their error, I would have paid for it out of pocket.

Add to all this, the banking, check writing/credit card payments, reporting and paying the state the sales tax withholding.

Now, multiply all these steps by all the custom items that may be specified on a project.

This is why designer’s must mark up the designer’s net price. Unless of course, they are charging their hourly rate for literally everything they do, which means they should be billing the client for the time spent to fix the problem. Which would go over like a lead balloon. Most would probably eat that time.

So, hopefully you see the amount of work that happens between when an item is selected and gets delivered in perfect condition.

As for those times when a designer’s price is higher than what an item may cost online, consider that the designer usually doesn’t have the buying power of an online retailer. I’ve seen prices online that are lower than my designer’s net price. There is no competing – except with exceptional customer service as outlined above. My guess is most online sellers will not provide this level of service nor can they offer the level of customization that a designer can.

I know this post was very long-winded – sorry! But it’s an important topic that I hope I shed a little light on.

And, the answer to the question of how many resources/vendors I used for the custom living room project shown at the top of the post… 18. Did you guess correctly?

 

xoxo Linda Would you like my Favorite Tips for a Well-Decorated Home? Click here!

24 thoughts on “The Designer Explainer: What the heck is “Designer’s Net Price” Anyway?”

  1. Hello Linda, I understand the frustrations for making a pricing scheme for a job that involves so many elements. Still, there are several basic charging methods, and if I were to hire a decorator, I would like to comprehend the basic scheme for that job, although I wouldn’t plan to audit each invoice. For those complicated, headache-y jobs like the ones you described, you best bet is to write them up into a soap-opera scenario and make millions!
    –Jim

    • Hi Jim – hmm, not sure I totally follow your comment. But, for the client, yes, a contract which clearly spells out the terms of the design fee is very important. And a clearly established budget for the furnishings, etc is also a mandatory item. So long as the budget is adhered to, there shouldn’t be any surprises for the client. If a client establishes, say, a $25,000.00 budget for a family room and the designer gets it done within budget and to the client’s satisfaction, it shouldn’t matter if the designer paid $12,500.00 for everything, or $20,000.00. The client has still gotten what he/she asked and paid for.

  2. Really valuable information on net price. I think I’ve finally arrived at a fee schedule that makes sense to all concerned and eliminates surprises for the client. Very clear and specific wording in my contract has also helped (me, since presumably I’m managing myself) eliminate the inevitable “creep” from the specified work area into other parts of the home/building – “oh, and while you’re here…” is a loaded phrase, lol.

    • “oh and while you’re here” is tied with “while you’re out and about, can you keep and eye out for…”. Project scope creep is very important to manage especially if one is charging a flat fee for the project.

  3. Love the clear example on how follow up and mistakes (not caused by the designer) require a great deal of time and that time is something most clients don’t want or have to spend on dealing with furnishings dilemmas. The value is there if the markup can be properly explained.

  4. The “wild west of the internet” indeed! That’s another whole topic – there is so much misrepresentation there… But, this is an excellent explanation of how this all works. The markup on furnishings covers the cost of the time, headaches, and ultimate responsibility that designers (or stores) take on so the client doesn’t have to – and in some cases – like your ottoman nightmare – it may not even really cover all the designer’s costs or time! Thanks for taking the time to spell this all out.

  5. You need to write a handbook. A text book. Something that’s required reading for new (and old) designers. And the salient points in a flow chart for people who are thinking of hiring a professional. So thoroughly explained, with real life examples that illustrate and drive the point home.

    I remember when you write about this ottoman, I think when it happened. Still love the animal print. 🐆

  6. Oh, how I’ve experienced these situations. If only vendors would get things right the first time and there was no such thing as shipping damage! Great explanation of the whole scenario.

  7. This is such a great breakdown of all that goes into what you do and how you charge. Oh how the internet has changed the way we source. There however, will never be a way to replace excellent customer service! Fantastic topic!

  8. Linda ~

    This is such a great post. As you know, I’ve shared it in other places. Thanks for writing it and explaining this term to us, your readers, to homeowners who need to understand it and to your potential clients that might see this post when they search on Google.

    • Thanks for your kind comments and sharing this post on Facebook Leslie! I do think it’s important for both designers and homeowners to understand more of what drives the pricing of custom home furnishings.

  9. Great article Linda! I got exhausted just reading your scenario and remembering similar situations. Most people have no sense or appreciation for the many hours spent behind the scenes making sure everything is as it should be, taking care of problems for things that are no fault of our own.

    • I’m so glad someone is here to remind me that I did, in fact, write a book. Well, in reality, I edited an existing book and tried to update it as best as I could. I should pull it out and remind myself if I wrote about designer’s net… oy. Also, you’re the only person I know who bought it Mary Beth!

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