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Product Pricing - Margin, Markup...

Discussion in 'Money, Accounts & Finance' started by JermaineR8, Jul 23, 2015.

  1. JermaineR8

    JermaineR8

    Joined:
    Oct 18, 2009
    Messages:
    1,401
    Hi

    I would like to know how everyone prices their items, usually I just said I want £X per item - Add the item cost, shipping, fees etc and then add £X on top.

    However now I would like to use a different method. I am going into the clothing industry and was curious of the average, google searches have shown me anything from 50-200%, so not sure on average what most use.

    I have read this article and there seemed to be confusion regarding the calculation for markup, the author said:

    Retail Price = [(cost of item) ÷ (100 - markup percentage)] x 100

    however in the comments, a contributor gave the formula:

    Retail Price = (cost of item) x (1+ [desired markup ÷ 100])

    http://www.shopify.co.uk/blog/14122681-9-strategies-for-profitably-pricing-your-retail-products
  2. Sc0tty

    Sc0tty

    Joined:
    Jan 19, 2010
    Messages:
    683
    Your pricing model is very static. I would suggest a more dynamic model that maximises your profit per item. Play around with prices. Dont have fixed models to work out pricing. See what the market allows and where you want to sit.

    You see people who start on eBay for example, they are happy making 50p or £4 profit on an item, and they keep this model when they grow. So a £14 item to buy they are selling for £16-20, because thats the model they followed on cheaper items, whereas that product should be going for £30.

    You need to research your products, not apply a formula.

    And those formulas you have given could be simplified to Retail Price = Cost x (1+markup%)
    Jed likes this.
  3. JermaineR8

    JermaineR8

    Joined:
    Oct 18, 2009
    Messages:
    1,401
    Thanks, will test out different models and see which works best
  4. Top Labels Online

    Top Labels Online

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    286
    Agree with the above comments by Scotty.

    That model or applying a single profit margin to all items is to me the worst thing you can do to your business.

    Certain items do allow you to have a profit margin higher than others, either because they are worth it or because they can carry that extra margin and leaving that on the table might be the difference between surviving and not surviving particularly on a retail business where margins can be as low as 2% or 3%.
  5. Sc0tty

    Sc0tty

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    A couple of years on from my post above, and now my model is 50% profit minimum. My top seller is a 65% profit item.
  6. Top Labels Online

    Top Labels Online

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    Indeed, better later then never hahaha
    My model is also minimum of 50% though to be fair not always achieved (my lowest margin is 25%) and my top seller at the moment is at 75% though I have two items at 125% margin but it is rare of course.
  7. Sc0tty

    Sc0tty

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    683
    You can't have more than 100% profit. Do you mean return on investment, so you make a 125% return on the cost of the item. If you are only making 25% return on some items, doesn't that cut it a bit close to the cloth when returns and problems are taken into account? Or is it a product with low returns and problems?

    Margins are different for me too, as competition grows that will push margins down, but that's life, and that what keeps the business changing and moving forward.
  8. Top Labels Online

    Top Labels Online

    Joined:
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    Messages:
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    Yes meant Mark Up and regarding the 25% margin, I don't see it as low at all though of course I prefer higher but having in mind most clothing retail net margins are between 3% and 12% roughly having 25% is not so bad if it can be contained to very few lines.
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