There is a lot of confusion for the general public as to how interior designers charge for their services. I believe in part the mystery stems from the plethora of entertainment media; never showing an exchange of money for services rendered, how much that would be given the scale and scope of a design project. Another confusing aspect is that depending on the type of interior design service, e.g. remodel, décor, lighting, consulting etc. the fee structures vary.
I will explain here how all the various pricing structures work within the interior design industry, hoping this will eliminate any confusion regarding designer fees.
The various types of fees are:
One item I know people are very confused about is the “contingency fee” or “re-sale charge”. It is quite understandable that this fee will throw the client off a bit as it pertains exclusively to merchandise sold “to the trade only”. The general public can only purchase goods at retailers so this is usually a foreign concept.
To the trade only is a wholesaler that sells only to those who have a re-sale license. The designer makes purchases from these wholesalers at a wholesale price, generally 40%-50% less and then “re-sells” it to their clients at a mark-up, the designer is therefore the retailer. This is the “contingency fee” or “re-sale charge”. Generally designers mark-up anywhere from 20% – 50%. (Note that a retailer also buys from a wholesaler and then marks-up their pricing from 50% -100%.)
Many retailers have been quite adversely effected in terms of profit margins by online sellers and the public who choose to purchase this way. In order to keep up with the online competition many retailers are selling a “discounted” price to designers, generally 5%- 15% off the retail price. This pricing is set to entice designers to bring their customers to purchase their goods as a designer potentially will purchase many times in a year and year after year rather than once in a lifetime from a single retail customer.
The designer price at a retailer gives the designer a bit of a mark-up fee opportunity for their time and payment to manage purchases and is usually not extended to the public. A designer may choose to pass the discount to their client but it is not required, it depends on the designer and how they have developed their business model. The client can of course purchase anything they want online or in a store but they will still be paying retail prices. The advantage of having the designer make the purchase is that the designer will bare the responsibility of tracking the order, be present for the delivery, inspection of the item upon arrival and resolving any issue that may arise (arriving broken, fabric upholstered backwards, finish is terrible, not right color etc.). When the designer makes the purchase, they are the “seller” to their client and thus responsible for all aspects of that purchase, if the client buys for themselves then the designer is not repsonsible for that purchase. Any mistake or errors are solely the responsibility of the purchaser and seller.
The hourly fee is simply charging the client by the hour for her/his time. This is usually the most appropriate type of compensation for consultancy work.
The Contingency fee only is charging a mark-up or “re-sale” charge on merchandise only, no hourly fee. This is no longer a common practice and usually reserved for very exclusive high-end décor projects.