Setting retail prices for the products you sell in your online boutique can be nerve wracking. You want to price high enough to make a significant profit on each item but not too high where potential customers are sent into your competitors loving arms 😉 .
On the other hand, if you price too low, you are guaranteed to be out of business within a few months.
Before we get into pricing you want to be very clear on who your target customer is. This will help you to know what s/he can easily afford.
For example: A brand that is serving a woman who is a high level executive can easily charge $400+ for a blazer. A brand that is serving a woman fresh out of college preparing for her first job would find it difficult to sell a blazer at that price point.
How to Set Product Prices in Your Online Boutique
Below, I’ve compiled a few questions to ask yourself when setting prices:
- Manufacturing or Wholesale Cost: How much does the product cost to manufacture or purchase from a wholesaler (include the cost of shipping the item to your business address)?
- Perceived Value: What is the perceived value of the product? There’s a fine line between being overpriced and a good price for the quality of a product. Considering the quality of an item into your pricing equation is great when it can be used as a marketing asset ex: Handmade, Made in America, Made in Italy, 100% Cashmere.
- Packaging Costs: How much does the packaging cost? (include the cost for all labels, tissue paper, marketing materials, and the box or poly bags)
- Shipping Fees: Will you offer free shipping? If so is the shipping price factored into the product price?
- Will you offer flat rate shipping? If so, is a percentage of shipping included in the product price?
- Customer Acquisition: How much does it cost on average to acquire a customer when you run paid ads? Most businesses either break even or lose money to acquire a customer, your job is to create an offer that is actually profitable from the first sale.
- Labor Costs: How much does labor cost? You may be shipping each item now and not paying yourself but you will eventually have to hire a team in order to build a sustainable business where you are not doing every little detail and burning the candle on both ends!
- Desired Profit: How much do you want to make on each item? Business owners that are just starting out rarely consider this question, but it’s one of my favorites. For example, for every t-shirt my shirt brand sells, the business makes $5. That’s money you can count on whether you’re investing in more merchandise, ads, etc.
MAJOR TIP: You NEVER want to compete on price but you want to know what the market bears for a certain product of your online boutique. You may see a boutique selling the same item for less than you but you never know if they are getting a price discount that helps them to offer a lower price OR if they simply are pricing too low and their business may be closing in just a few months!
I personally aim for a minimum of 70% blended profit margin, but I try to sell products that have high perceived value so that I can charge more and have more profit to reinvest. I’d recommend that you go no lower than 65% profit margin.
If you’re not pricing for profit, it’s like pouring water into a leaky bottle: no matter how many sales you get, the math will never add up. If you want to build a online boutique business that’ll essentially run on its own, then you have to know how to play the numbers game. And that means thinking about your bottom line first.
In summary, setting prices for your online boutique involves a multifaceted approach that combines cost calculation, customer perception, psychological factors, future planning, and profitability considerations.
By carefully balancing these elements, you can establish a pricing strategy that not only sustains your business but also propels it towards growth and success in the dynamic world of online retail.
What’s Next
The journey doesn’t end here! If you are hungry for more guidance on steering your online boutique toward success, I’ve got something special for you.
Dive into my free video training: How to Launch (and Grow!) Your Dream Online Boutique So You Can Leave Corporate Life Behind… (Without Taking *Forever* To Figure It All Out On Your Own!)
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