Startup Video

Product Pricing for Profit: A How-To

Product Pricing for Profit: A How-To


Hi, guys. I’m Syama Meagher, CEO of Scaling Retail, and today we’ve got a really fun topic, which is a how-to guide for how to really set the right price points for your fashion startup business. So, guys, traditional markups and the way you used to think about pricing is really a thing of the past. Today, when we take a look at pricing for profit, we actually start to think about what are the other brands you sit next to and how are you actually going to give off that look and feel of a brand that should be charging those price points? So today, we’re going to talk about three different steps and ways in which you can also be pricing for profit. Number one, it’s going to be understanding what your brand value is. Number two, it’s going to be what are your non-negotiables, and we’ll talk a little bit more about that. And then number three is going to be pricing strategically for retail. Those are some of the three main components to help us start to build out your ideal pricing for profitability.

So the first it’s really understanding your brand positioning. The first step in doing so is really starting to take a look at your competitive matrix. What are the other brands that you have out there that are sitting within your space? What are they charging for similar products? For example, companies like NakedCashmere that are really the Everlane of the cashmere business, really have their brand values at being able to be kind of a loss leader, right, you go to them because you want that quality, you want that kind of experience of having a high cashmere product, but you’re actually getting it at a better price, so you’re looking at it as more of a value-driven brand.

Then, when it comes to looking at branding and positioning, you really want to make sure you understand what the price point is that your customers are willing to spend. Now, while looking at your competitors is very helpful for that, you also want to stop to take a look at things like surveys, market research, and any type of trend analysis that helps you understand where the shift and consumer behavior is. Now, obviously, this happens all the time and consumer market shifts, however, as you’re starting to price your product in the beginning stages, have a really good understanding of what kinds of shifts are happening in your particular niche for your brand. Now, a lot of times when people start to do market comparisons or competitive analyses, they tend to look at their companies and compare themselves to much bigger brands, right? While you might be starting off as a luxury company, you’re certainly not going to compare yourself to Chanel or Louis Vuitton or Gucci for that matter. You may compare yourself to another similar small start-up like an Off-White that is kind of leading the edge in terms of luxury and street wear, but you’re not going to compare yourself to heritage brands.

So when you start to figure out what is the market willing to spend for my product? What are my competitors placing their price points at? And really, what is the brand value? Meaning, am I going to be a value-driven brand like a NakedCashmere or an Everlane? Or am I going to be a procedure luxury brand in which case, showing the value, showing the dollar amount saved, is it even going to be part of our branded proposition?

Next, we’ve got to understand what your non-negotiables are. So oftentimes, guys, when you’re starting a business, you say, “I want to build the most amazing product ever. I want it to be something that is both sustainable, I want it to be luxurious, I want to make it with fair artisans and pay them a fair living wage, and I want to do all of these things, right, source from the most amazing fabrics, introduce the best technologies, make sure that it’s the best fit ever.” But, guys, you’ve gotta ask yourself, “What are our top three non-negotiables?” Meaning, what are the three things that my brand will always stand for and that I always show in my product and in my branding? Everything else is a negotiable.

And the reason why that’s important is it can significantly impact your bottom line in terms of your cost of goods. And guess what, even though we’re looking at this from a tops-down perspective, which is “Where’s my branding and where is my market at?” We’re also looking at it from a bottoms-up standpoint, meaning, the cost of goods really do have to make sense for you to be able to price for a profit. You need to have the great brand positioning met by equally great and strong cost of goods. So when it comes to your non-negotiables, I say pick three non-negotiables, pick something that you know is a core essence and a part of your brand and something that is going to be true and true throughout all of your collections.

Now, lastly, guys, we’ve gotta be pricing also for retail. A lot of direct-to-consumer brands tend to think of themselves as “Hey, I can cut out those margins that I would normally be spending on, let’s say, wholesale to retail markups, and I can just go straight to selling my product at a cheaper price point.” However, guys, so many great direct-to-consumer brands are now branching out into wholesale business models, and it’s very important to think about your business in terms of what that retail strategy looks like and then start to think, “Okay, well, I might be direct-to-consumer today, but I should be building in between, let’s say, a wholesale price and a retail price at least between a 2.5 and a 3.2 markup.” Now, that can be substantial and heavy for a lot of brands, that does mean it might put pressure on some of your cost of goods to drive them lower. However, you should price yourself for a retail business model right off the bat because it’ll open you up to so many more selling channels as your business decides to grow. So for example, guys, we see companies like Bonobos, for example, right, started off as a direct-to-consumer brand, open up their flagship retail, had their online business, did pop-ups, and then all of a sudden they started being sold at Nordstrom, right, they needed to make sure that their profit margins made sense to be able to take on those kinds of retail accounts. So do yourself a favor in the beginning, and when you’re pricing for profit think about how your eventual retail game is going to look even if you’re starting off as direct-to-consumer.

All right, guys, get more on this topic in our in-depth blog post on how to develop and leverage your competitive matrix. And make sure that you sign up for our free download on how to price your product for profitability. All right, guys, please leave comments below, feel free to shoot us an email at, we’d love to see how our company can help you start, launch, and grow your business. And also check us out on Instagram at Scaling Retail. Hope to see you soon, bye.