Pricing your products

In the economic tgeory of perfect competition there’s an assumption of perfect knowledge, whereby consumers are assumed to know, among other things, price, functionality and quality. And, with some research, the Internet has made this theory a reality. As shoppers become increasingly Internet
savvy, it’s much harder to charge higher prices for the same product. I recently spoke to a wine merchant in London who margins had dropped almost 5% over the last ten years (from 14% to 9%). He specializes in fine and rare wines, which are
now far easier to track down online. Gone are the days of 100% mark up.

In addition, as you know, Alibaba is the go-to website for sourcing goods. This can cause problems too. If you buy “off the shelf” products that are readily available, you haven’t added value. I noticed that Jamie Oliver’s team buys much of its kitchenware from Alibaba suppliers. They don’t change the products, but instead add Jamie’s name to them. Some of the
selling prices are ten times the original purchase price! I’ll leave you to be the judge of that. However, he’s got an existing brand: Jamie Oliver. What have you got? (And, in fairness to Jamie, he seems like a good guy, who gives lots of his time and
money to charity.)

If you want to charge higher prices you need your own products with your own designs and your own brand. This is not as daunting as it sounds. I’m not suggesting reinventing the wheel, merely improving products and rebranding them. And if you need designers or illustrators there are plenty available on Fiverr. But, you may be better off speaking to the manufacturer. The good ones will work with a wide range creative industries. I found a hugely talented and lovely illustrator this way.
Once you have settled on your product, brand name and logo,
you can start to get to the nitty-gritty of setting a price. I’m going to assume you want to make money on each item you sell. (This is not always the case, as some people are willing to
sacrifice short-term profits for long-term growth – in fact, isn’t that what Amazon’s always done?!). To guarantee a profit yiu need to price your products using Cost Plus Pricing. In others words, add up all your costs and then add on additional sum of money. You can then work out your profit margin.