Pricing Guidelines

Q. I'm trying to start a clothing line, but can't figure out pricing. It seems if I charge what I think the pieces are worth (labour, materials, overhead) I price my product way out of the market. Is there a standard pricing formula? How do I figure this out? Thank you, Sarah

A. Ah, Sarah, you've hit on the eternal question for so many of us craftspeople and designers! Balancing profitability with a price people will actually pay is one of the biggest challenges facing us all, and it's something you'll be working on for the entire life of your business. One standard formula is quadruple. Basically, it's double to wholesale, then double again to retail. That's right. If it costs $20 to make it should retail for $80. I've heard of people adding in 10% or so to cover those hard-to-quantify expenses: repairs on your machine, phone bill, etc. but that makes it even more challenging to keep the retail price reasonable.

While it may sound shocking, that "mark-up" just compensates you for all those overhead expenses and allows a smaller percentage of profit for your efforts of selling your product. If you retail it yourself, at craft shows or in your own shop, you're taking on all the expenses of the retailer (booth fees, store rent, your time to be there selling etc.), so the last half of mark-up compensates you for all that. Realize that these mark-ups are out there in everything we buy, at chain stores and restaurants, and among the dozens of craftspeople and designers- not one of us is making "too much" money! I know a lot of designers fall into a trap of wanting to offer things at "reasonable" prices, but to survive and thrive, we have to make sure we're covering all our expenses, and making enough profit to live from.

Typically, starting out designers under-price. It's easy to miss out on the little expenses that add up as your business grows: thread, buttons, studio rent when it outgrows your home, printing price tags, mistakes etc. And you tend to undervalue your time. Four hours spent hand embroidering a detail on a pile of skirts counts even though you were watching 'Lost' on DVD.

On the other hand, some people overprice, counting all their expenses and time, even though their production isn't very efficient yet and their product is totally unknown and somewhat undeveloped. It takes time and experimentation to make your product worth to the public what really went into it.

Part of the process of the business is working towards a good balance. Over time, you'll find ways to streamline your production by improving your skills or process, making more of the item at once, designing it in a simpler way and generally finding ways to cut corners. You should also find less expensive suppliers, or be able to negotiate bulk prices as your business grows. You'll find you may be able to shave 10% off your production cost in 4 or 5 different areas, which really adds up.

You need to take a step back from your product, and see where it fits in the market. Ask yourself and your friends what makes your product special. If you don't have a good answer, your customer sure won't see it, and there are malls full of cute clothes that are dirt cheap! Over time, and with experimentation you'll find ways to add value to what you make without adding a lot of cost or time to the process. Often it's a tiny detail that makes someone fall in love with it, and will get them to be happy to pay the kind of price you need to get for it.

Generally I suggest people look at what they'd like to get for an item, looking at all the time and expenses, then look at what's out there that's comparable and see what price it's selling for. If those numbers are similar, you're off to a good start. Pick a price and get your stuff out there.

If your production costs are just a bit too high, I'd pick a price you can live with and get out there selling, but know that your job over the next months is to look for ways to reduce your costs and get more efficient.

If your production costs are way high, it's back to the drawing board. Let's say your specialty is handpainted artwork on teeshirts, and you think they should sell for $80, to cover all the time they take to make. Unless they are truly spectacular, it's still a tee shirt, and a very tough sell over about $50. Maybe having a simple shift dress style to serve as the canvas would increase your cost by only $20 or so, but now a handpainted dress could be $200, 300 or more! Or, if you really want to do tees, then have the art put on a silkscreen and add a few painted details that reduce your production time to minutes.

This is an ongoing challenge that I face all the time with my own line, and I see all the designers at my two collective shops, Fresh Baked Goods and Fresh Collective, working hard to find the right balance too. The market has really changed since I started my business in 1994. Since then a lot of new chains have come into Canada offering fashion and accessories at ever cheaper prices. And it's cute stuff! So us designers making small quantities in Canada really have our work cut out for us. But there are customers out there who want something different and well-made and are willing to pay what it's worth. You just have to get out there and find them!

Good luck with your clothing line and thanks for the question!