Designing clothing, attending fashion shows, and/or meeting with wholesalers is an exciting aspect of your clothing business. Once you have determined what you will include in your store or clothing line, you now need to price your products.
To best mark up and price your clothing line, there are five key areas to explore. Examine these five Cs of pricing – costs, correct calculations, competition, clarity, and customers. Weave components of each of these into your pricing strategy.
To flourish in your business, you do not want to price your items too high or too low. Your brand and store need to make money and cover all of your expenses. But you also need to sell products, so a balance is important. Continue reading for ideas on pricing your clothing line.
Costs
Your first step in determining how to mark up and price your clothing line is to tally your total costs. If you are designing and making your own clothing, you will have one set of numbers to calculate for your base product cost. You need to make sure you include –
- Design time
- Space where sewing and design occurs (percentage of floor space – rent, utilities, insurance)
- Cost of samples
- Materials and trims
- Shipping and handling costs to obtain materials and trims
- Time/labor to sew your clothing – either yours or someone you pay
If you are purchasing clothing and accessories from a wholesaler, you need to include these costs into your base product value –
- Purchase price from wholesaler
- Shipping and handling costs
Adding on to the cost of the products themselves are two categories of costs; both of which fall under the label of overhead costs. Fixed expenses, which do not vary each month, is one group, and variable expenses, which change or vary each month.
- Fixed Expenses
- Rent
- Insurances
- Website, phone, and other technology
- Contractors – content writers, photographers, etc.
- Salaries
- Loan repayments
- Variable Expenses
- Utilities
- Office supplies
- Promotions and marketing
- Banking and credit card usage fees
These costs need to be determined. Your next step is to allocate these overhead costs to your products. Once that is completed, you have all the data you need to understand your total product cost.
With the number, you can now use one of the most straightforward methods to price your clothing line. Cost-plus pricing is often used in this calculation. You may also see this pricing referred to as markup pricing. The markup percentage that you choose is up to you. It should include profit and money needed to reinvest in your business. Your formula to calculate your pricing is –
Cost of Clothing (includes all costs) X Markup = Selling Price of Item
For example, if the total cost of a sweater is $85 and you need 30% markup, here is your calculation –
$85 (sweater) X 1.30 (markup) = $110.50 (selling price)
You need to change your percentage of markup to a decimal. If you do not add a one as part of the decimal, you need to do a two-step calculation.
$85 (sweater) X .30 (markup) = $25.50 (profit for this sweater)
$85 (sweater + $25.50 (profit) = $110.50 (selling price)
Everyone has a different philosophy on rounding up, rounding down, or using prices that all end in the same amount. You can sell the sweater for $110 or $111 and not use cents. You can make all your selling prices end in $0.99, so this sweater will be $110.99.
How Much Can A Clothing Store Make Annually?
Correct Calculations
First step of double checking your calculations is reviewing your lists of costs. Keep receipts of all your purchases. Truly, you want to account for every single item – paper clips, tags to label clothing, markers, etc. It is not being persnickety; it is how you will operate your business at a profit.
Second step, use a spreadsheet to assist in calculations, inventory tracking, and bill itemizations. Be sure to verify that your formulas in your spreadsheets are correctly performing their functions. Set up intervals to remind yourself to reconfirm your formulas. Sometimes when you add columns or rows, your formulas do not set themselves correctly. So, anytime you add new rows and columns, look at your equations.
If your computer does not auto-save your documents, you might want to investigate this feature.
Thirdly, when you purchase items for your business and add new lines of clothing, have categories that you use. This can help you to explore how different categories are performing. Analyzing different expenses and sales can be a great way to know what lines to add and what to rebrand or eliminate.
How To Price Your Clothes In Your Business
Competition
Many consumers are avid comparison shoppers. It is easy to check prices online. If your customers know what your competitors are selling sweaters for, then you need to as well.
This knowledge will aid you in your pricing of your products to sell. Unless you are planning to make profit through sheer volume, it will be difficult to stay in business if you price yourself lower than anyone else. Explore the price ranges you find for similar items. You want to compare yourself and your pricing to shops that are comparable to yours. Find some online competitors and brick and mortar shops, especially if you will be offering a physical location.
Knowing the competition is important for marketing, which will impact your pricing. Armed with information about one aspect of other shops, take a few items and explore in greater depth. Take a look at the quality of the material used in construction of the garment. Analyze services that another fashion line offers. If your prices are higher because of quality, services, or another aspect of your store, it is important that you highlight this to your customers.
Seasonally is a good time to see what other stores are offering.
Clarity
The method that you choose to determine how to mark up and price your clothing needs to make sense to you. However, when you present it to your customers, your pricing needs clarity. You do not want customers to need calculators to figure out what their bill will be.
Similar products should have like price points. Tee-shirts should not range from $22 to $82 unless it is evident the actual difference between the high and low. Grouping similar products with the same pricing is a way to entice a customer to purchase the same type of tee-shirt in two different colors.
When you are having a sale, find an easy way for customers to determine the new price on an item. You never want to complicate pricing. You want clients to trust you. Otherwise, customers will be wary of spending a lot of money in your store.
Customers
Understanding your customers is key to your success. If they are budget conscious shoppers, you should have strong product lines with appropriate pricing for this group of shoppers. Perhaps, you have a mix of customers. Then it would be important to have a blend of products that will appeal to many people. However, remember it is difficult to successfully meet the needs of all demographics. You need to balance trying not to be too broad with your fashion line to be too narrow and not have enough customers.
When you do need to raise or adjust prices, keep your customers in mind. That might be a good time to add a new product line that will continue to meet your clients’ needs. If you decide to broaden the types of products you sell, do so a step at a time. Test out and evaluate the new items and their pricing before you invest too much of your profits.
How To Add Value To Your Fashion Brand In Five Steps!
Related Questions
How do you change percentages to decimals?
To change a number that is expressed as a percent to a decimal, you divide. Per is a ratio of one number to one hundred, meaning for each 100. Therefore, you divide the number stated as a percent by 100. For example, 12% is 12 per 100 or 12/100 for .12.
How do you calculate sales tax?
To calculate sales tax on a sale, first you change the tax rate to a decimal. Then you multiply the cost of the items sold by your answer. If sales tax is 6% that is .06 and the taxable clothing sold equals $220, multiply 220 X .06 = $13.20 is sales tax.
How do you calculate the amount saved on discounted or clothing on sale?
To calculate the amount saved on sale clothing, you first change the percentage to a decimal. Then you multiply the decimal by the original price of the clothing. The answer is the amount saved. For example, 30% off an item that costs $58, .30 X 58 = $17.40 savings.
How do you calculate the sale price on discounted clothing?
To calculate the sale price on clothing, you need one more step in your calculation from the amount saved. Use the last example, 30% off an item that costs $58, .30 X 58 = $17.40 savings. Now, subtract the savings from the original price – 58.00 – 17.40 = $40.60.
To learn more about how to start your own fashion clothing line check out my startup documents here
Please note: This blog post is for educational purposes only and does not constitute legal advice. Please consult a legal expert to address your specific needs.
Meet Shawn Chun: Entrepreneur and Fashion Business Fan.
I’m a happy individual who happens to be an entrepreneur. I have owned several types of businesses in my life from a coffee shop to an import and export business to an online review business plus a few more and now I create online resources for those interested in starting new ventures. It’s demanding work but I love it. I do it for those passionate about their business and their goals. That’s why when I meet a designer or boutique owner at a craft fair, farmers market, retail location or anywhere else I see myself. I know how hard the struggle is to retain clients, find good employees and keep the business growing all while trying to stay competitive.
That’s why I created Fashion Business Boss: I want to help fashion business owners like you build a thriving business that brings you endless joy and supports your ideal lifestyle.