The Top 5 Mistakes You're Making When Pricing Your Products
When it comes to pricing your products, there are many factors that come into play when determining your final wholesale price.
If you recall from our previous blog post we discussed these different factors and why they are super important questions you need to be asking yourself BEFORE figuring out your price point.
NOT ENOUGH OR TOO MUCH MARGIN
Margin is something that seems to make designer’s heads spin when you just say the word. We get it. It’s a part of the business that we don’t necessarily enjoy in terms of it being “glamorous”. No one wants to stare at an excel spreadsheet all day and play with formulas (well unless you’re somewhat geeky like I am).
But the thing is unless you are making good margin points you aren’t making any money. You’re essentially selling your collection for a hobby.
There are a few things you need to consider when determining your margin percentage.
How much money do I want to make?
How am I positioning my brand?
How does this percentage reflect in the actual wholesale and retail price?
By asking yourself just these few questions you’ll get a better understanding of what percentage margin you want to be making.
*Please note that when you are first starting out, it can be somewhat unrealistic to expect high margins. Reason being: you’re a new brand, and factories are most likely going to give you higher costs because they know your quantities per item are going to small.
AREN’T TAKING INTO ACCOUNT A STYLE’S SALEABILITY
Believe it or not, the way you price your product can be based on two factors. The first is the margin, which we just discussed, and the second is the product’s perceived value.
One thing I want you to remember is that just because you’re making a healthy margin on a style doesn’t necessarily mean that that’s what the percentage should be.
If for example, you’re selling a jacket that you’re thinking of pricing at $900 to get a healthy margin. But, your competitors are pricing their jacket at $1,200 or higher. You also realize that your jacket is much nicer, has a better cut and overall design and you just believe your jacket will sell much better than the competition. By all means, you should raise your price.
If you truly believe in a style and feel that your design and brand aesthetic is superior to your competitor you should try to get the most margin as possible.
The main thing to remember is that you’re directly in line with your competitor's pricing or better. If you’re a no-name brand, but your price is slightly better than your competitors, this can be very attractive to a buyer who’s looking to take a chance on a new designer.
NOT ACCOUNTING FOR SHIPPING, DUTIES, FEES, ETC.
When you get your initial price from the factory, they do not typically include any extra costs that will be added when it comes to the actual shipping and duties.
If you aren’t taking into account these fees, you’re not going to make as much money as you should. Adding a blanket of 20-30% roughly is a good amount to account for when it comes to determining your wholesale price.
YOU’RE NOT WORKING BACKWARDS FROM THE RETAIL PRICE
Now, this is a debatable topic, but I believe you should always try to work backward from what you think the price should sell for at the retail level.
When you do this, you at least have somewhat of a target FOB price that you can aim to achieve from the factory.
Although this is something you may not ultimately be able to achieve, you need to at least have a starting base as to how you could see the product selling for in the store.
NOT ANALYZING YOUR PREVIOUS COLLECTIONS BY THE PRICE POINT LEVEL
If you aren’t looking at what’s selling you’re not going to have a clue as to who is really resonating with your collection. Once you can start to pinpoint your sweet spot in terms of what sells well by the actual price point, you’ll begin to get a better idea of what to design from the get-go.
Make sure you’re getting honest feedback from buyers from your ideal store and make sure you’re making these changes each season. Buyers love to give feedback and ultimately want to create a partnership/relationship with you.
If you truly think about it, it’s a total win-win situation. They want your collection to sell just as much as you do.
In conclusion, if you avoid making these five mistakes you’ll be in much better shape than most brands.
Try not to get discouraged or confused. There’s quite a science behind pricing, but ultimately tweaking, testing, and getting as much feedback as possible is what’s going to help you in perfecting your pricing strategy.