Free swipe filE-Learn the 5 Major Online Store Mistakes
That Are Costing You Sales

listen now

Season 1 - Episode 4

from markets to millions, online store success with jodie minto

Season 1 - Episode 4

In today's episode, I talk about how to set your retail prices for your online store.

I share the hidden expenses and factors you need to consider when it comes to pricing your products.

Listen in to get advice for your Ecommerce business and ensure your own success and sales.

Enjoy!
xo


Show Notes:

Resources:

Curious to check out my fashion brand? Take a look here: iland co. 

Enjoying the Podcast?

Tag me @iamjodieminto on Instagram and let me know you are listening. 

Join my Community:

Fashion Business Incubator

Tune into the
Online Store Success with Jodie Minto Podcast

subscribe on apple podcast

LISTEN ON SPOTIFY

LISTEN ON iHeart Radio

LISTEN ON amazon music

Or, simply search for the Jodie Minto Podcast.

Show transcript

Hello, and welcome to this episode of Online Store Success with me Jodie Minto. Thank you for joining me today. Today, I am here to talk about how to set your retail prices in your online store because deciding on your recommended retail price is often a difficult decision. We obviously are in business to make a profit, I hope. But we also have that fear of not wanting to overprice our products and then make zero sales. Many, many online store owners find themselves antagonising over their prices. So let me share with you some considerations you need to think about before you set your prices. 

Right, let's begin. So after running my own online fashion store iland co. for over seven years now plus working with many other eCommerce brands, this is what I've discovered. There are many hidden expenses that eat into your profit margins, we are definitely in a dollars and cents game. If you set your prices too low, you will make zero profits or worse you will make a loss on most of your sales. Acquiring a customer who spends $20 is just as costly and difficult as it is to acquire a $200 customer. And what I've also noticed is often the cheaper priced customers are often the hardest to serve. If I want to make $2,000 in revenue or sales, and I'm selling a $200 dress, I only need to sell 10 dresses. Versus if I'm selling a $20 dress, I then need to sell 100 dresses to make the same amount of revenue. It's clear that selling less at a higher price point is often easier in order to achieve that same revenue goal. We also need to look at advertising costs because they eat into your profit margins very quickly. For example, I can spend anywhere between $20 and even $100 in Facebook or Instagram advertising to make one sale. So if I'm selling a $200 dress that I've manufactured myself, so I have already a healthy profit margin, and it cost me $100 to make that sale, I'm probably breaking even. However, if I'm selling $20 dresses and trying to run Facebook and Instagram ads to make that sale, and it cost me the same amount to get that conversion, I am in big, big trouble.

Some of the most successful eCommerce fashion brands I've worked with are those that sell higher priced items. For example, more than $150 per style or more. This means that the average cart order is a lot higher and they also have a lot more profit margin to play with, regardless of whether they're manufacturing or reselling another product. Because even if you're purchasing another label and it's a $300 dress, you're probably purchasing that dress for around $150. So you still have a $150 profit margin, or depending on your taxes in whichever country you might be in. But you've got quite a good chunk of money to still be able to double and try and spend some money on ads in order to convert that sale and make more of those sales.

Also, we need to consider that most of our websites offer some sort of discount to customers on their first purchase. So if you are selling a $20 dress, and then you're offering $10 off their first order, and then you also then need to pay GST out of that the cost of the dress which was probably $10, anywhere between $5 and $10. And then if you're running ads, you are making a huge, huge loss. So you need to consider all of the elements around what makes up your prices. 

So when we consider setting our retail prices, we need to think about three things. First of all, who are you serving? Second, what is your niche? And third, What's the cost of goods sold? I.e. How much does it cost you to secure that product ready to sell it? So for example, if you're planning on targeting teens or tween girls, let's say and you're trying to sell a $200 beach dress to them, you're going to find it quite the challenge. I have a teenage girl and I am the one that is spending and paying for all of her clothes. And if she came to me and said, Mum, I want this $200 beach dress, I would be saying no, because as most kids and teens and tweens, they spill stuff all over it. They get tired of it very quickly and they're still growing at the speed of light. So
if your business model is set up targeting that particular demographic where mum’s still paying for the product, and wouldn't necessarily see the value at A $200 dress, it's going to be a very steep climb. 

Also, you need to think about the demographic that you're selling to and the products. So is it a good market fit? So again, you know, selling expensive goods to teens or tweens is probably not a great idea. Or it's going to be a bit more challenging to get those conversions. So for example, for iland co. , our target demographic is ladies probably, I'd say 40 and up. So they've got a little bit more disposable income, and targeting them for products around the $150-$160 mark isn't as difficult as if I was trying to sell that same price product to a much younger audience. So you need to think about your niche and who it is that you're selling to because despite the cost of your goods, and how much they cost you, there might not be a good match around your ideal retail price and who it is that you're selling to, so definitely consider that.

The most important part of the puzzle is actually knowing your cost of goods sold (cogs). This needs to include the finished landed cost of producing or sourcing the product, any shipping costs, including sending samples to and from the factory, the cost of shipping the product to the customer, if you offer free shipping, the cost of the design work the whether that's print design, whether that's tech packs, any contractors or consultants hired during that creation process, you need to think about screens, if you're doing screen printing, I know I did a little bit of screen printing, I don't anymore, because screen printing, they make up two or three or four different screens, and then you have to outlay for those for a particular print. And then if you don't want to do that print again, well, then they're just they're just disposed of. So it's an unnecessary cost, but a cost nonetheless.

Also, you need to think about the bags, tags, the mailers, any kind of thank you cards, that you might send out tissue paper stickers that you use to send your items to the customer. So you need to include all of those things into your cost of goods sold and don't forget any GST for those in Australia, you're instantly going to lose 10% off the top of your sales. So you need to consider that. So let's talk about once you know what that cost of goods sold is that that landed costs of that product. Let's say for argument's sake, it's $15. And I'm ordering 100, the total cost of those finished products is $1,500. Then I tally up all of the other costs incurred to bring that design to life, including shipping samples to and from screen costs or printing costs or graphic print design costs. Designer costs tech pack cost, shipping the bulk production, which might be another $1,500. So the total cost for those 100 units is more likely to be around $3,000. Particularly shipping at the moment is a huge, huge cost. So the true cost of each of those items to me is actually $30, which is very different from $15 at first glance when you look at the quote from the factory. So once you have this number, you need to then consider whether or not you're offering different afterpay type payment options because they can take up to 8% as well. So you might lose 8% of any order. If your customer then pays via afterpay. Also, I know I haven't looked at it recently but I know previously, if a customer then returned an item that they'd used after pay, I wouldn't get that 8% back from after pay, they deduct it off my next next payout, I don't get that back. So if they're using afterpay, and then they're using a 10% discount code or free shipping, that all eats into that profit margin as well. 

You also need to consider whether or not you plan on wholesaling your product. So if you're like me and you manufacture your own product, and would like to wholesale your products to other resellers, whether that's face to face boutiques, or I've just been to Hamilton Island, so there's a little resort stores and things there that would be perfect for iland co. garments. If I want to approach them and say ‘hey, would you like to stock iland co in your store?’ they obviously need a markup as well. So generally their markup is 100%. So say they buy something from me for $75. They are then going to double the price and sell it to their customer at 150. So you're instantly selling that product at half the retail price. So if you don't have the profit margin in it, wholesale will definitely not be an option for you. So you need to almost work out,  once you've got your cost of goods sold, and then looking at ideal retail price and then figuring out if you want to wholesale, you need to do the math and see whether or not that's going to work. Always remember that you can start at a higher price and then later discount if need be or if it's a slow moving product, it's very difficult to raise your prices after you've been selling it for a while unless you've made some sort of significant changes or added value in some way.

So I hope these tips have been helpful to you. I cover more on this and a formula around figuring out your retail prices in my online programme called Online Store success, which is an eight week programme taking you week by week through different modules of building and scaling your own online fashion lifestyle or children's wear store. You can find out more about it at jodieminto.com under courses. I thank you for joining me today and I look forward to seeing you on the next episode. Bye for now.

Tune in each week to learn how to build and scale your own online fashion or lifestyle eCommerce store.

My mission is to help other emerging fashion entrepreneurs crack the code of eCommerce success for a life of uncapped income, flexibility and fun.

Want Jodie to be a guest on your show?

EMAIL US

Recommend an episode topic or guest expert

TELL US

JODIE HAS BEEN FEATURED IN:

PRIVACY POLICY   |

 SITE TERMS AND CONDITIONS   | 

Jodieminto.com  - COPYRIGHT 2022 © Jodie Minto

REFUND POLICY