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pricing for profit!

retail recipes

Hey there!

As designers and artists, your passion is to CREATE beautiful and innovative product. It’s a given that you find joy in the process of creating and sharing these goods with the world, but you need to make money in order to continue on this path. Pricing your creations is not only an important factor in selling to a customer, but also when you sell to retailers. Having a clear idea and layout of your retail price and wholesale pricing strategy will make selling that much easier for everyone involved.
 
Many people have a lot of trouble figuring out exactly how to price their merchandise. There are three components that are most important in this process and it’s easy as A-B-C: cost to make the product, wholesale price and retail price.

To figure out your cost to make the product, add up your cost of materials, labor, shipping and repping fees (if you have a sales rep). Most people tend to leave out labor costs but this is a legitimate addition. Your time is valuable and must be accounted for!  The sum of these factors is “A.”

To figure out your wholesale price, multiply A x 2.2 to get to your wholesale price. We can call this “B.” (Round number to next whole digit.)

To figure out your retail price, multiply B x 2.2 to get your retail price. We can call this “C.” (Round number to next whole “even” digit.)
 
These numbers are a good base point from which you can tweak based on a number of factors. Take a look at your competition and know how you are positioning your product in the marketplace. You don’t always want to under-cut them; if you can justify a higher price then go for it! Seeing your various costs laid out will also enable you to identify certain areas you’d like to cut down on if you want your price to be more competitive.
 
Whether you are selling 6 pieces or 600, you need to price for profit!

So take action now! Run through this pricing exercise for your product and share your insights here.

xoxo,

Grace Kang
Your Retail Product Mentor

p.s. A BIG, warm welcome to all of the new readers who joined our community! You are going to love the resources you will find here to help you make your product retail-ready… Enjoy!

Comments

  1. Thats great advise thanks. Its hard to estimate labour cost since I spend much time creating designs before making these ideas develop into a final product. How would I account for this? I’m a new member and finding your blogs useful in keeping me focussed! Thanks.

    • hi kashmira,
      that’s a good question and you are not alone! many designers struggle with adding labor cost into the cost of making the product. i would suggest a simple exercise:
      1. if you are in the DIY/handmade world, figure out how much time it takes to make one product.
      2. figure out an hourly rate you are comfortable with based on your answer from #1.
      3. add that amount to the total cost of making one unit.

      you want to get in the habit of putting in “something” for your labor, even if it’s $1.

      hope this helps :)

  2. I make fabulous nursing covers! When I calculated the costs it said my retail for them should be $118! That’s a lot! I charge $36 + $5 for shipping. Most competitors charge 35 and below!

    • congrats on your nursing cover business!

      i completely hear you. this is why you have to do this exercise forwards and backwards. if you realize that your suggested retail is coming in too high, then you have to go back to your cost components and figure out which is can be changed and which cannot.can sometimes when people have different category of business, it’s good to take a lower margin on certain category and higher margin in others. overall, your total business ends up averaging out.

      pricing is definitely a science AND an art. :) if you need further help in pricing your product, please feel free to reach out.

      cheers, grace

  3. Hey Grace! I have been multiplying my costs by 5 to achieve my retail price for years and it’s great to know that I wasn’t off by much. I mostly do outdoor and indoor craft shows. Thanks for this article.

    • hey christine,
      that’s a GREAT margin for you since you are selling direct to customers – go you!

      when you are ready to start selling to other retail shops, you will be ready. :)

    • Hi Grace,
      This comes in handy as I find it a bit hard to evaluate how much to charge for labor cost. I am making embroidered bags, pouches, iPhone sleeves etc…
      At the moment I have decided US$10/ hour is the max I can charge, but eventually I would like to start charging 15 and up.
      With regards to margins, I have been multiplying by 2 so far, but your suggestion is interesting. And I agree with you that margin can’t be the same for all products.

      Thanks for sharing this post!

      • hi marie,
        it’s good to get into a habit of putting something in there so that you know when to increase it as your orders get bigger! maybe there might be other cost factors that you may be able to negotiate to balance that out. it’s all about playing with your numbers and seeing what looks and feels right for your product! :) grace

  4. Grace, this formula kills me as I have combined 2 labor intensive skills ( illustration and sewing) in an unusual item that attracts buyers but suffers from being in a category of lower “perceived value”–personalized cloth baby book.
    A photo album or simple monogrammed blanket is perceived as more costly than my custom made cloth alphabet book printed and sewn from my original art and five hours of labor! I make more margin on my paper prints and cards but customers/retailers want my unique book design. How do I find my boutique retail niche? It is priced at $54.00 and needs to be > $200. by your formula! Advice??

    • hi joanne,
      thanks so much for sharing! let me ask you this? do you want to sell to other retail stores or are you open to selling your custom items just direct-to-customers? there are certainly many businesses that do very well selling just direct-to-customers, which could help you with your margin situation. it’s something to think about… esp for your custom items. if a shop wants to buy your custom items, you will have to explain all the workmanship that goes into it to justify the high value. if it’s so far from what is out there, then you might want to start researching and seeing if there is a way to get it made “less” expensive. :) hope that helps! grace

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