Updated: Mar 12
You've built your brand, found the perfect name, sourced a sportswear manufacturer, produced products and just when you feel the "hard work" is over, you stumble onto the next issue- how to price your sportswear products. Now, I can completely understand why this might feel like an intimidating task- after all, the price of your products affects not only how your store performs, but also the profit you'll make as a company.
Here is where I'm going to give you the benefit of the doubt. The fact that you're reading this blog tells me that you're doing the right thing. In an age where we have all the information we need at our fingertips, it's quite bizarre (to me anyway) why a lot of people who are looking to start a sportswear, or gym wear brand don't utilise the wealth of free, helpful information on the internet. Anyway, I digress...
In this blog, I'm going to help you asses the total cost of your product, the strategic approach you choose and then finally land on a ball-park figure, or at least give you an idea on where your pricing should end up. Don't worry, this won't be like going back to GCSE Business Studies...
Assessing your real cost of your product:
This is the first and the most important stage of pricing your product. Total cost isn't what you pay your manufacture... it's the accumulation of what you pay the factory, shipping, any customs clearance, VAT, design costs and any other associated costs that amount as a result of producing that garment.
A lot of brands and business owners aren't realistic about their true cost. Once you've sat down and calculated everything you'll be quite surprised to realise that it might be a little bit more than you'd actually anticipated (and I know, because I've done the same).
Some manufactures might make it more difficult for you to know the real cost of your garment (more often than not because they're actually overcharging you). For example- if you're paying £10 per unit for a tee, then £2.50 for print, then there are additional "surcharges" such as shipping, VAT, individually bagging items, administration fees, file conversion fees etc then you'll quickly realise that the £12.50 you thought your product actually cost you, is really around £16! White2Label Manufacturing follow a "transparent" pricing strategy, ensuring that they remove all the waffle and give you the most coherent price across the board. Read their blog about their pricing here
Choose a pricing strategy:
Once you've sat down and figured out your true cost, now it's time to figure out how you want to play this game.
The first is quite simply; cost-plus pricing. There is a very basic formula to work this out:
Cost + profit margin = price.
I'm not here to teach you to suck eggs, I highly doubt you need much expansion on that, but it's a great way to price if you'd like to retain the same margin across all products within your sportswear collection.
The second is; market, or competition-oritented pricing. This involves research (which is good because you should be conducting a lot of market and consumer research) but essentially involves you finding out what your competitors charge and then doing one of the following:
- Pricing above the competition: this can be done if you feel your product, or service is superior to what is available in the current market.
- Pricing inline with competition: probably the safer bet if you'd like to appeal to a larger market but still make a decent margin. One thing to bear in mind is that competitors costs might be lower and therefore might turn over higher profit at the same price as you.
- Pricing below the competition: very simply lowballing it and therefore offering a more appealing price point and potentially stealing some of your competitors customers away.
The third is; anchor pricing. Personally, I'm not a huge fan but my opinion doesn't matter here! This is essentiality where a brand sets an "RRP" and then immediately puts the products on sale, announcing huge sales and appeals to people who want to feel like they're getting a good deal. A great example of this is Boohoo.
The last one we're going to touch on is; penetration pricing. This is where a brand, or a business will enter the market at a lower than average price-point and as their loyal customer base grows, they will slowly increase their pricing. This works great if you see longevity in your business, but you firstly have to ensure that you are making some margin and secondly that you're committed to giving consumers a reason why your pricing is increasing (i.e. increased quality)
Now, let's reverse engineer:
You now know your total cost and hopefully have decided on a pricing strategy, so the final task is to reverse engineer it. Decide on where you'd like to be situated in the current sportswear market, decide on your strategy and then minus your cost.
Although this will only give you your gross profit margin (cost of goods - sale of goods) but to work out your net profit margin (operating profit) you then have to account for all other operating costs; i.e. wages, office space, website maintenance etc.
I hope this blog has helped you with your pricing strategy and as always, we'd love to hear your feedback so please do drop a comment, or email us with anything you'd like covered and we will do our best to cover every topic that is requested!