Shopping for new inventory you just KNOW your customers are gonna go crazy over? Super fun.
Doing the math and the research to figure out how to price those items? ...Yeah, not quite as fun. But just as important!
Setting your boutique’s prices is probably something you may not have thought much about when you first started your boutique, but it’s worth some serious time and attention.
Think about it – the prices you set are directly tied to your profit margins and, ultimately, your revenue.
Set boutique prices that are too high and you might turn more budget-conscious customers off and sell fewer products.
Set boutique prices that are too low and you risk cheapening the value of your awesome products (and not making much $$$ at all!)
While there are plenty of suggested equations and rules of thumb for pricing your products, it’s not an exact science. The perfect prices for your boutique will depend on the types of items you sell, your ideal customer, overhead costs, and loads of other factors.
But if you do a little homework, you can absolutely find that sweet spot that helps you get paid and leaves your customers returning to your store again and again.
Here are a few things to keep in mind as you price your boutique items:
Identify your costs
The price you pay for wholesale boutique items isn’t the only cost you’ve got to take into account. Other expenses like fulfillment, packaging, labor, and transaction fees will all eat into your profits. (Plus the cost of shipping if you offer free shipping.) Make sure your margins are high enough to cover those things.
Most experts recommend that your profit margin should be 45% or more. Here’s how to determine your retail margin percentage:
Retail Price - Cost / Retail Price = Retail Margin %
Shop & research
Now that you have a good idea of the additional costs you’ll have to cover with your margins, it’s time to do some research. (And some shopping!) Get to know your target customer and what they’re typically willing to spend on certain items.
As you shop for inventory, compare the wholesale cost of a certain item with its suggested retail value (MSRP). Pay attention to those profit margins. Then, look at competitor websites to get an idea of what similar products are ACTUALLY selling for. While MSRPs are a good place to start, they’re best used as a jumping-off point – you’ll want to double-check that they’re realistic.
Choose a Pricing Strategy
Once you’ve selected some affordable, on-trend inventory you think your customers will love, it’s time to set your prices. Here are a few strategies you can use – feel free to test a few out on different products or choose just one. (Again, it’s not an exact science. Experimenting is sometimes the best way to find out what works!)
Keystone pricing is a simple, popular way to set a healthy profit margin on your products. Essentially, it just involves doubling the cost of the product, leaving you with a 50% margin.
Want a slightly lower or slightly higher margin? Here’s how you’d calculate your retail price, depending on your desired margin percentage:
[(Item Cost) / (100 - Markup Percentage)] x 100 = Retail Price
When you buy wholesale, you’ll likely notice that the manufacturer also lists a suggested retail price. While this is a very fast and convenient way to price your products, these numbers can be rather arbitrary – make sure you do some competitor research to figure out what similar items typically sell for. Pricing your items below MSRP can also help you compete on price while still enjoying a good margin.
Selling more than one product for a single price can help you create higher perceived value for a lower cost and drive larger volume purchases. Consider selling similar items together, whether as a pack of T-shirts, a set of jewelry, or a two-piece shirt and skirt set.
Ever wonder why every price seems to end in .99 or .95 when you’re out shopping? It’s not random – it’s based in psychology. Studies show that prices ending in an odd number (usually 5, 7, or 9) increase sales when compared to rounded price points. If you’re considering selling an item for $52, consider selling it for $47 or $55 or even just $51.99 instead.