Expert: - 10/14/2010

Question
Hi Jane,

I am sorry but mu computer freaked out on me and I do not think I finished my though in my last email.  I do not remember how much I mentioned so I will just try to refresh:

I am currently creating artwork in Adobe Illustrator.  They are mostly architectural.  Kind of like facades of famous buildings.  I want to turn them into magnets
(high Quality; like acrylic).  I was talking with a manufacturer and he was giving me a price per unit.  For example lets say $2.00ea.  Where do I go from
there?  I would like to get at least $2.00 myself.  What would a vendor expect to make?  I would imagine these would sell for about $5.00 or $5.50.  How do I start trying to sell these as well as make sure the vendor will not turn around and sell them for $10.00.  Maybe I am asking too many questions that are all over the place but they seem to follow a basic pattern of setting up pricing and guarantees.
I may have a few follow up questions based on your answers. I hope you do not mind.

Anthony

Answer
Hi Anthony,

Pricing can be tricky and something you need to carefully research and determine your market before you begin.

First of all, I do not understand that you are concerned that your vendor might sell them on their own? Are you asking if your manufacturer can sell them? I am not clear on your question. If you are hiring a company to manufacture your product, your design - they do not have your permission to manufacture them for their own purpose. Generally this can be addressed in your contract with the manufacturer.

You also need to research the market for products that are similar and find out what they sell for at the retail level. So if similar products retail for $10 then you can work backwards to know what your cost of goods needs to be.

If your manufacturing costs are $2 and that includes all your cost of goods (meaning all materials included with the products including packaging) then you could wholesale to stores at $4 (meaning you are making $2 per unit) and the stores would then sell for $8 or more depending on what their margins need to be. Many stores operate on a 60% margin - so if they paid you $4 then they would sell the product for $10.

You can have a manufacturer suggested retail price, but you really can't necessarily tell each store they can only sell your product for $5.50 when they have to pay you $4. No one will buy from you.

If you think the product should retail for $5 - then your manufacturing costs would need to be closer to $.50 if you want to add on $2 for yourself.

Selling to stores is different than selling direct to the consumer. However you can sell directly to the consumer at the same rate as your product is selling at the stores. If your cost was $2 you would be making $8. However you must remember that you would be selling one at a time rather than a package of several units wholesale to stores.

The first thing I suggest is research your target market - see what similar products are selling for at the retail level. This will help you in determining what your costs need to be.

I hope this helps - you may want to sign up for my free report and newsletter for many tips and information on product businesses.

Best regards,

Jane Button
www.design2marketsuccess.com