As consumers (and, often, bargain shoppers), we all think we’re experts on price. But when it comes to setting prices, things get a lot more challenging.
In the crowded print on demand market, selecting the right price isn’t just a way to stay competitive - it’s crucial to the survival of your business. Knowing your niche and finding your unique selling proposition can help you avoid a margin-destroying race to the lowest price. Still, you can’t let your store become untethered from the market average, either.
Fortunately, Gelato has several new pricing tools that can help you get a handle on things (once you make an account, anyway):
The Price Calculator uses your expected sales volume to calculate your potential profit margin, which you can factor into pricing decisions.
The Price-Setting Tool in our product catalog helps you group products and make bulk edits. You can also select your currency and country to estimate shipping costs.
Product Price Insights offer clear, intuitive price-setting guidance with added profit validation and checks for negative profit recognition.
But even with these helpful tools in your back pocket, you’ll still need a solid understanding of price fundamentals to set the right strategy for your online store.
To set prices correctly, you need to be aware of the obvious and not-so-obvious costs impacting your bottom line.
These four price strategies are well-suited to print on demand stores: cost-plus pricing, competition-oriented pricing, price bundling, and dynamic pricing.
Once you’ve set your strategy, maximize your profit margin by offering promotions and discounts, acting on data-fueled insights, and providing outstanding customer service.
You’ll need to account for many costs while running an online store for print on demand products. Carefully managing these expenses and other monthly costs can help you improve your profit margin, allowing you to pocket more of what you make or keep your retail price low. Passing savings on to your customers can help you boost sales by being more competitive on price while offering the same or better quality goods as your competitors.
While your situation may vary, we’ve listed out some of the most common costs that can eat away at your profit margin:
It’s easy to overlook the design cost for your products, but this is an essential component of establishing your average price base.
While sitting down with a pencil and paper to sketch your designs doesn’t cost anything, leaping from paper to pixels requires specialized design software.
Using Gelato’s Design Editor to see your graphic on hundreds of digital mock-ups is one way to save on software costs, but in some cases, you might still need special tools, like a digital drawing pad and stylus, to bring your ideas to life. Make sure to factor those costs into your potential price range.
High-quality designs can be a critical differentiator in the crowded print on demand market. Consider outsourcing design services to an experienced artist to help your products stand out online and save yourself the time you can put back into running and promoting your store.
If you are an experienced graphic designer, factor your design price into your work. In other words, how much do you want to pay yourself for time spent designing?
As a print on demand product seller, your production cost is whatever you pay your supplier for their products. Depending on the products you sell, these costs can add up quickly. Choosing the right print on demand service for popular items like t-shirts and phone cases will help you keep these costs under control.
You have a couple of options on how you handle shipping rates for your online store:
Let your customers pay the shipping cost. Allow your customers to choose how fast they want an item, and let that dictate their shipping price. Note that this strategy can cause frustration when the original retail price appears to change at checkout.
Absorbing the shipping cost yourself is a great way to make customers smile. Still, you need to be sure doing so won’t adversely impact your bottom line or affect your ability to offer expedited shipping options.
Offer free shipping after customers exceed a certain spending level. This solution offers a good blend of the two previous options. It allows you to stay in the same price league as competitors on a base price per item basis, helps you avoid shipping costs, and encourages customers to buy more.
Partnering with Gelato is another excellent way to control your shipping cost while making your business smarter, faster, and greener.
We do branded dropshipping differently: our hyper-local production and delivery model enables more than 85% of products to be made locally. This benefits the communities where these products are produced and helps control delivery times, costs, and carbon emissions.
Choosing the right platform for selling your print on demand products is one of the most important decisions you’ll make as a store owner. Expect to pay fees no matter which route you take to sell online.
Ecommerce marketplaces such as Amazon, eBay, or Etsy give you instant access to a broad audience of potential customers. However, their pricing structures typically include listing, payment processing, and transaction fees.
Ecommerce platforms like Shopify typically charge a subscription fee on top of their payment processing and transaction fees but do not charge you to list products.
If you run the website for your print on demand business, your domain and hosting costs are effectively your platform costs.
Prevent platform fees from nibbling at your margins by regularly reviewing your monthly ecommerce platform subscriptions.
Buying pay-per-click ads through Google, paying an influencer to promote your products on the ‘gram, or boosting your posts on Facebook are just some ways to market your products.
Ensure you’re factoring these costs into your retail price and earning a return on your investment. In other words, if an influencer charged you $10,000 to promote your products, you need to know how you’ll attribute revenue back to that campaign so you can decide whether you want to work with them again.
Uncle Sam and your state will collect tax on whatever income you earn through your online store. You’ll also likely need to pay a self-employment tax to the federal government, even if your print on demand business is a side hustle. You’ll also need to collect, deposit, and report the sales tax base your customers pay with each purchase.
While these aren’t necessarily costs in the traditional sense, they still affect your bottom line, so it’s important to be aware of them and factor them into your market pricing.
Understanding the main costs that affect your profit margin can help you choose the right pricing strategy - or combination of different pricing strategies - to mitigate their effects. Selecting a strategy also doesn’t mean you’re stuck with it forever: experimenting with different product pricing models is important. However, it can be challenging to switch price models in some circumstances.
Also known as markup pricing, a cost-plus pricing strategy involves identifying your unit cost for each item, then adding a fixed percentage to that amount. Your unit cost is the total of all the production activities that went into creating that item (i.e., the stuff we outlined in the last section).
One of the main advantages of this pricing system is its easy implementation: retail stores, grocery stores, and department stores commonly use this pricing model. It also lets you point to variable product costs if you raise your prices. And, since the markup theoretically covers product costs and all your expenses, you can expect a consistent rate of return.
A key drawback to this model is the risk of selecting the wrong markup percentage. If you become untethered from the average market price, you’ll differentiate your store in the wrong way for price-conscious customers.
There’s also no guarantee your markup will cover your costs if you don’t hit sales goals. This model can also stifle your urge to comparison shop for lower service prices, which can hurt you in the long run.
This retail price model is one of the most commonly used pricing models in the print on demand business, given the importance of price in this crowded space. It weighs competitors’ prices very heavily, sometimes ignoring items’ costs or market trends in demand.
Using this strategy, you might choose to price your goods slightly over or under your competition. If you charge more than your competitors, your unique selling point needs to be strong enough to justify your price.
When using a bundle pricing strategy, you’ll offer two (or more) of your items at a single, reduced price, saving customers more money than if they had bought everything separately. For example, if your online store sells baby clothing, you might bundle certain pairs of socks and onesies together at a lower discount price. Meanwhile, a drinkware store might bundle a coffee mug and a tumbler.
Implemented well, this strategy can set your store apart by adding more value for customers buying multiple items.
Using dynamic pricing, you’ll adjust your prices in response to customer demand and the average market price for your items. This pricing model is prevalent within the rideshare industry, where “surge pricing” can significantly increase a trip's cost. In the travel and leisure industry, plane ticket and hotel room prices regularly rise and fall on the whims of travelers.
For the print on demand industry, you might temporarily lower your price based on seasonal demand or a relevant promotional event (perhaps with clever bundling). While this is a great model to help capitalize on recent market trends and opportunities, it can also cause friction with customers frustrated by your slippery price structure.
In addition, this pricing model can make it challenging for a print on demand seller to increase their prices - can you really justify a “surge” in photo book demand to your customers?
Once you’ve analyzed (and, hopefully, reduced) your flexible and fixed-cost exposure and chosen a pricing strategy, it’s time to optimize your income stream. The following activities can help you identify or strengthen your unique selling proposition, which can help you justify a higher cost in the price-sensitive print on demand market.
It might seem counterintuitive, but discount pricing and promotions can help increase your profit margins by incentivizing customer purchases. Though the starting price might be lower, increased unit sales volume means increased revenue, raising your profits over the same time period.
Price bundling can also be a practical promotional move encouraging customers to buy more than they would otherwise.
Your store’s profit margin is an important metric, but it’s only one part of the story. You need ongoing awareness of other data points for your print on demand business. Think about:
What return on investment did you get for that influencer collaboration?
Is your products’ base price in line with the market average?
Which of your social media posts has gotten the most shares?
Was your t-shirt discount pricing promotion effective?
Should you cut your advertising budget or design costs to increase your profit margin?
Stellar customer service isn’t necessarily something you want to advertise - let them assume everything will go just fine! Of course, issues happen, and excellent customer service isn’t just a way to distinguish your operation from your competitors: it’s table stakes for print on demand businesses.
When customers trust you’ll make it right when things go wrong, it builds strong brand loyalty.
Experimenting with pricing strategies is essential to determine what works best for your business. No matter your decision, remember to be diligent about analyzing data and making any necessary tweaks - especially when it comes to cost data.
Reducing your costs can help you offer more competitive pricing without sacrificing margins. Engaging Gelato’s print on demand services is a savvy way to create and sell high-quality print on demand products without managing inventory or dealing with fulfillment headaches.