Pricing your collection is probably one of the most delicate art forms you’ll encounter while working in fashion. Pricing too low may add more potential clients, but at the risk of your product coming off as “cheap”. Sure, if you price it too high, you risk eliminating part of your demographic, but the same can be said if you price your product too low.
- Know your worth.
Likely, there are other products similar to yours. No matter how unique, I can guarantee there are at least a handful of products similar to yours. It may not have as many features as yours, but it’s close enough. Where are they priced at? Where are they selling? If they are selling in a retail store, they likely are priced lower.
Selling to retail means lower margins, but higher quantity. So, you may only make $2.00 off of a shirt, but spread that $2.00 across 500 shirts and you will be taking home $1,000.00.
- Don’t just factor production costs, but development, materials, and how you’re going to sell it.
The sooner you’re able to figure out your production quantity, materials costs, and retail price, the sooner you can determine your budget for development and production. The development process is essential to selling a quality product, so be sure you make room in your budget for these upfront costs.
- Know your desired margins, but more importantly, know your lowest acceptable margin.
A lot of entrepreneurs or advisors suggest trying to get up to a 50% margin. While that (or higher) is ideal, when you are starting out, sometimes you have to sacrifice margin in order to get your product out there. So, while it is important to know your ideal margin, starting from the bottom in order to have a well designed and developed product should be of higher importance. Fashion isn’t a get-rich-quick industry and it takes money to make money, but there isn’t anything wrong with starting slow and starting small.
Use this handy equation for a rough retail/wholesale price.
Retail price = (([development cost] + [production cost] + [materials]) ÷ (100 – [margin percentage])) ÷ [quantity]
- Example: 50% margin
- Retail price = (($2300 + $2900 + $1600) ÷ 50%) ÷ 200 units = $68.00
- Example: 25% margin
- Retail price (($2300 + $2900 + $1600) ÷ 75%) ÷ 200 units = $45.33
This equation is a great place to start, but make sure that you factor your market research into your retail price as well. Pricing is a balance of so many things. It may take you a few seasons and a few “sales” until you get it right, but you will learn your brand’s balance over time.
Before you can price, you’ll need to produce. Get started with our free Production 101 e-course today!