Pricing your designs can be intimidating when you’re not sure how to set them. New fashion designers often make the mistake of pricing their designs way too low, which limits potential profit and can cost the business dearly.
Figuring out the prices and the business side of things is not as fun and creative, but it’s important to understand if you want your fashion label to succeed.
Apparel and Accessory Pricing Strategies
Identifying a pricing strategy will simplify the process of pricing your designs. There are lots of different pricing strategies that you can use, but the top three methods are:
- The Backwards Pricing Method – The backwards pricing method takes a product and looks at the recommended retail price (RRP) of it, then divides it by four. If you can make/produce your clothing item with that price, you can charge that amount. Sometimes the RRP is from your supplier or manufacturer, but you can calculate it by multiplying your wholesale price by 2 or 2.5.
- The Keystone Markup Method – Keystone markup is often used in retail. This method takes the cost price from the manufacturer, then multiplies it by 2 or 2.5 to get the wholesale price. You multiply that by 2 to get the retail price. That will be your cost price.
- The Absorption Pricing Method – The absorption pricing method takes into account all of your fixed and variable costs. It's the cost price plus your overhead plus profit margin, multiplied by 2, or 2.5.
These are only three of the many options for you to choose from. You will need to examine your brand and decide which pricing strategy will work best for you and how your business is structured.
Pricing for Your Target Market
Another important aspect of pricing your fashion designs is knowing who your target market is. There are three different pricing categories:
- Budget pricing
- Luxury pricing
- Value pricing
Budget pricing includes prices that are low and appeal to consumers who want the low prices as opposed to quality items. Luxury pricing is for high cost items, where buyers pay for quality and the brand name. Value pricing falls in the middle of budget and luxury pricing. Long lasting and quality items with prices that are not too high is what consumers want in this category.
Consumer shopping behaviors created these different priced categories, so if something is priced very low, consumers will expect the quality to be cheap. If something is priced very high, they will expect high quality items.
When pricing your clothing, you will need to remember who your target market is, how they shop, and where they fall in the income bracket. If you have your prices above or below your target market, you will end up reaching fewer people. How you set the prices for your designs is also how your brand will be perceived. If you want your brand image to project quality and prestige, your prices need to reflect that.
It’s best to try and get your pricing right from the outset, because if you change midway, while not impossible, it may be harder for your brand to perform in its new pricing category.
If Your Best Prices Are Higher Than You Expected
If by following your pricing strategy, you discover that your initial strategy was far off, don’t stress. It’s important to value the work that you do, and by doing so, you will find the customer base who will also value your work. Part of taking pride in your work and what you do is setting the price of your work accurately. You want to stay in business and continue to do something that you enjoy, so don’t be afraid to raise and set your prices where they should be.