The T-Shirt business can be highly profitable, especially after you get the hang of it. A huge aspect of the game that will affect your odds of making a good profit is how you price your products. This is one of the most exciting, yet nerve wrecking, aspect of the business. It is both an art and a science that requires a little bit of intuition and experimentation with your brand to decide how you want it to feel and be perceived.
Deciding on the perfect price can be tricky, but having a strong business plan makes the decision easier. Your pricing among other things directly affects your revenues and profits, which are the deciding factors between a successful business and an unsuccessful one.
Pricing your products can be a balancing act. Pricing your products low may result in a lot of sales, but could possibly not be making you any profits. While pricing your products high can result in fewer sales, but for a higher profit. It is also important to look at your target market and their demographics. Ultimately, you’ll have to decide whether you want higher prices and lower volume sold or lower priced products and higher volumes sold, and which direction will enable you to achieve the greatest profit.
When looking at the T-shirt industry, there are common trends among prices. Here’s a look at some of the most common tee price ranges:
$10-$15: Brands that are selling at these prices have usually been in business for quite some time and can afford larger bulk orders, allowing them to sell their shirts at a much lower price while still making a profit. Others in this price range include new brands who plan on marketing “cheap shirts”.
$16-$24: This range covers the “unofficial average price” for the majority of tees out there. This price range includes new and old brands. With this price range, there is huge potential for great profit margins in you can place bulk orders, while still a good enough profit margin when making smaller wholesale orders.
$25-$30: Brands who price their tees in this range usually present themselves as higher quality or offer more intricate designs with multiple mediums. Many streetwear labels are priced in this range.
$31-$60: Tees priced in this range are often only accomplished by upscale labels. These prices are associated with luxury, affluence and generally more complex production processes.
The simplest formula to calculate a general retail price for your product is using keystone pricing. It is an easy rule of thumb that states you double the production cost to obtain the wholesale price, and then double the wholesale price to obtain the retail price, or:
Production Cost X 2 = Wholesale Price
Wholesale Price X 2 = Retail Price
While this is the easiest way to calculate a price and ensure an ample profit margin, there are instances where this method is not the best method to use. It is important to look at other factors and adjust the price accordingly to fit your market.
Another strategy in pricing your product is psychological pricing. Studies have shown that when customers spend money, they are actually experiencing a loss or pain. However, if you help minimize this pain experienced, it’s possible to increase the likelihood of a customer making a purchase.
Traditionally, businesses will do this by ending the price with an odd number like 5, 7 or 9. For example $12.99 or $19. By doing this, you are tapping into the irrational part of a person’s brain and triggering impulse purchasing through the perception of a sale or deal.
Perhaps the best pricing strategy of all is to research the t-shirt prices of your competitors. You will want to try and keep your pricing in the same range as brands in the same niche as yours. You can price below or above the competition with varying results as well.
Pricing below your competitors can certainly lure them to your products over theirs. This strategy can be highly effective, especially when you can negotiate with your supplies for lower production costs and actively promote other products as well. However, this tactic can be difficult to sustain for smaller businesses due to lower profit margins. In addition, it is completely possible to gain the edge over your competition by pricing higher! By doing this, you are branding yourself as more luxurious, prestigious and exclusive. This “halo effect” can be a positive pricing strategy by giving your customers the perception that your products are better. However, this strategy can be difficult effectively manage in price-sensitive locations and demographics, especially when there are several other options to purchase similar pricing.
As you can see there is never a “one size fits all” approach to pricing. It is not as simple as black and white. It is a constantly changing force with several factors affecting whether it will go up or down. These are just a few options to consider when deciding what will ultimately work for your business. These pricing strategies will give you a starting point to decide what price fits your particular brand and situation, while ensuring a healthy profit margin.
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