Fashion Pricing aka Setting prices for products is one aspect of the fashion business new entrepreneurs find very confusing. You have an idea of your first products, you have developed your business plan, but your launching process cannot be complete without setting prices for your products.
Although this process can be quite challenging for you as a new fashion entrepreneur, we are here to help you. Let’s look at certain factors to consider when Fashion Pricing for your fashion products:
This is the first step to starting a new business; it determines your approach to the business, your products, and its pricing. If you make branded tees or your merch for a target audience, your first step would be to determine how much plain tees are selling on the market. Carry out a survey and look for different sellers who have a similar clothing brand to yours. Use the results from the survey to determine your average price.
Although this factor alone cannot guide your price determination process, it gives you an idea of what your price should look like. Asides from your market research, there are more factors you should put into consideration.
- Determine What Type Of Product You Are Selling
There are three types of fashion products; a luxury item, a budget item and a value-based item. You must work on this stage and identify the type of category your products fall into before you decide on a price. Luxury items are goods and services that are considered elite in a particular society. In this case, the target customers make the brand a luxury brand, not a product. Your target customers won’t care about the cost of the items as long as they get the look and quality they desire. It is the type of prices you set that helps your buyers know the quality of what they are buying.
Budget items are the type of fashion your target audience can wear without worrying much about maintenance and upkeep. They are everyday items and they should not be priced too high. In the middle of these two categories are value-based products. In this case, your customers pay for the value they get. Their payment determines the type of value they get.
- Figure Out Your Manufacturing Costs
To figure out your manufacturing costs, there are some factors you need to ask yourself. Factors like the price of materials used, labels, shipping costs. design and branding and all other factors that go into manufacturing. After figuring out all of these, you can move to the next step.
- Determine Your Margin To Figure Out How To Set Prices
Your margin is the amount by which revenue from sales exceeds costs in a business. It is the measure of profitability calculated by finding the net profit as a percentage of the revenue. As a business with the intention of making a profit, your profit margin should be somewhere between 50% and 80%.
The profit margin formula is Margin percentage = (Retail Price – Manufacturing Costs) / Retail Price
Consider this example. Let’s assume you can make a branded tee for N4,000. That’s your manufacturing cost. When you did your initial research, you found that similarly branded tees are sold at retail for N10,000. N10,000-N4,000. Divide that number by the retail price of N10,000 and you get 60% as your margin.
There is a direct relationship between the price of your product and the amount of profit you make per product.
- How Much Margin Do You Want To Make?
To be successful in the fashion business, you need to make a profit. After all the hard work and time, you need to pay yourself and your employees. You will also need to pay for other expenses and whatever else goes into your fashion business. You need to make your margin cover all your necessary expenses and leave you some profit so you can continue to grow your business.
I hope the above Fashion Pricing tips will help you figure out how to set prices for your fashion products. At the beginning of your business, you will have some space to experiment with prices and profits, it is however not advisable to switch from low prices to high prices suddenly. Take your customers through your rebranding process, show them what has changed and why there is a need for a price increase.