The t-shirt business is a lucrative venture once you learn how to do it. A major aspect of the business is the pricing of your goods. Your net profit is largely dependent on the prices of your products. It can be a little tricky to get it right because if your prices are too high, you will drive customers away and if you set them too low you will not be able to make any profit. Since pricing is such an essential part of your business, this particular post will help you figure out whether you are pricing your t-shirts too low.
If your business is just starting out, you will not have enough information or data points to work with. Inadequate information will make the process of setting prices extremely difficult. Because you may opt to rely on deductive reasoning or guesswork to determine price, there is a very high chance you are not going to get it right the first time. It is usually easier to determine if your prices are too low than to determine if your prices are too high. A number of factors go into determining the right price for your t-shirts. Here are a few pointers to look for if you want to win the sale without compromising on price.
You Feel Like You Are Not Making Any Profit
Do you feel like you are working your ass off but not seeing any profit? Perhaps you are not charging what the product is worth. You might also be shortchanging yourself on price. Pricing often starts with determining how much income you want to generate. It is quite sad to see many people going into t-shirt business without determining how much profit they need to make it a worthwhile investment. T-Shirt pricing starts with determining what income targets you want to achieve depending on the number of items you can sell.
Very often your profit target is determined by the operating costs. That is why you will need to account all your expenses when determining your potential revenue. Taking this into account can help you make a good guess with regard to what you need to charge your customers in order to make a good profit.
How much do your products cost? What was the shipping cost? How many t-shirts were misprinted or messed up? For example, you order 200 black t-shirts and they are costing you $2 each. It cost you $40 to have all 200 t-shirts shipped to you. So you will add 0.2 to the $2 for each tee and there you will have the cost for each t-shirt ($2.20). Obviously it will vary from seller to seller. You may have a one man store or you may have employees. If you are running a one man store, it will be up to you to decide the hourly pay you want to earn. This again could be different for each and every one. Whatever the amount you choose you must make sure that you are investing enough cash back into your t-shirt business to cover extra expenses.
Are You Attracting Cheap Customers?
There is no denying that cheap prices always attract cheap customers. Most businesspeople set extremely low prices as they always believe that setting high prices would push customers away. Low-ball prices can attract more potential customers but low-ball prices can kill your profit as well. Setting the price on the low end will attract many bargain hunters. As a result, you products will end up in the dead zone.
If you are dealing with many cheap customers, then there is a high chance you are pricing your t-shirts too low. If you raise your prices a little and immediately the bargain hunting customers go way, then you will know your pricing is near what you ought to charge. A price hike can stop such customers from even attempting to negotiate on price again. Even so, be sure to raise the price based on the quality of the t-shirts. The value is what consumers think the product is worth.
In addition to your costs materials/supplies and labor, you also have some hidden expenses. For instance, every month you must pay for the website hosting bill, electricity and marketing. Other extra overhead may things such as: alarm system, heat press machine, insurance, gas, postage, packaging, and office lease.
You Win Almost All Contracts You Bid on
This is especially true if you are a contractor or freelancer. If you find your t-shirt business seems to win all the contracts that you bid on, chances are something is seriously wrong with your pricing. Either you are setting very low prices or you are just good at bidding. Perhaps you are enjoying a considerable competitive advantage, but that is not always the case. You may be setting too low prices. The dangers of using lowball prices to entice buyers is that it can make your business run bankrupt in a few years to come.
How Are Competitors Setting Their Prices?
Are they higher or lower? Do you match up? It is always encouraged to keep your t-shirt pricing at the same level as products in the same niche as yours. You might be tempted to sell your t-shirts cheaper than your competitors so that customers prefer yours. Remember this is not always the case. The cheap approach is not necessarily the best approach to selling your products. Therefore, align your prices with those of your competitors. Never price your t-shirts too much lower or higher than your competition without having a valid reason.
You Are Using Discounted Prices Too Often
Another way to know you are pricing your t-shirts too low is when you are offering discounts too often. There is nothing wrong with giving discounts, but it is only productive if used within reason. If you use discounts too often in order to lure customers, customers will get used to your discounted prices, and it will become your regular price. As a result, you will experience lower profit margins. In addition to this, customers may become mistrustful and suspicious of your everyday prices.
Setting the Right Price
To establish the right price for your t-shirts, a clear understanding of the product’s benefits to its customers is of paramount importance. The value of such benefits, therefore, can be measured easily. Other factors such as brand reputation and online purchasing options should be evaluated through market research.
First and foremost, there is no perfect formula when it comes to setting prices for your t-shirt. It will largely depend on what your competitors are charging for their t-shirt and what your customers are willing to pay. The first thing you will need to do to carry out an extensive research. Search the internet for current shirt prices and try to find out what competitors are charging for their items. As mentioned earlier, price your shirts too low and you will run bankrupt or price your too high and customers will run away. Also, if you price too low, customers will think something is seriously wrong with the quality of your products. They might be made to believe that the price is too good to be true.
The primary reason people start a business is to generate revenue and if your t-shirt business is not generating any profit, chances are your business will run bankrupt very soon. If you want to take your business to the next level, you must place more emphasis on profits. A profit is what makes the business keep running.
Calculate Your Markup
There are a number of principles that need to be considered when calculating markup pricing. Markup pricing usually ranges from forty to sixty percent. You must first calculate the cost of making each t-shirt. For example, if the cost of creating your shirt is $30 and you set a markup price of $15 and sell it for $45, then your markup percentage is 50%. The 50% markup should cover all your operating costs. Once expenses have been covered, you can expect to pocket in about twelve to fifteen percent of your markup.
It should be noted that your markup will not always be the same for each different t-shirt you sell. If the t-shirt is selling like hotcakes, you may be allowed to sell it at a higher price. Shirts that are less popular may take time to be sold. In order to clear them up, you may decide to sell them at a discount.
It is not always simple to tell if your t-shirt price is too high or too low, but you need to try as much as you can to set at a fair level to stay in business. It is very easy to be tempted to set your prices too low when your shirt business is new in the market. When you are just entering the market, you may feel the need to lower prices to beat the competition. There is no problem with this marketing strategy but you must make sure the money will be compensated in the long run.