You’ve worked hard honing your formulating skills and spending your time, effort and money making your amazing natural and organic cosmetic products: but do you know how to price handmade products?
In our guide to selling homemade cosmetics, we show you how to properly price your products. You’ll learn everything you need to know when making your skincare products to sell.
What is an RRP, and why does it matter?When selling homemade cosmetics in a store or online shop, you make an agreement with a retailer. They buy your products upfront at an agreed wholesale price, stock them and then (hopefully) sell them at your recommended retail price (RRP).
The RRP is the price your customers will pay in a shop. It contains the retailer’s markup (the difference between the price they pay and the price they sell it for) and any taxes they must pay.
But what is the difference between a retailer’s margin or markup, and why is it so high?
What is the difference between ‘markup’ and ‘margin’?
Understanding markup and margin is essential when deciding how to price handmade items. Markups and margins are usually expressed as percentages and are ways that retailers calculate the money they make from buying your product at a wholesale price and selling it.
A markup is expressed as a percentage of the wholesale price, whereas a margin is expressed as a percentage of the RRP.
Most retailers will request a margin of between 40% and 65% before sales tax is added to make the RRP. Whilst this may appear your retailer is taking an awful lot of money for doing very little, remember that retailers are an essential part of your business.
Retailers drive traffic into a store or website, provide marketing, postage and packing (if online), aid with customer service and more. Retailers have high overheads, such as shop rental/leasing, staff, marketing, software and hardware, shop fitting and decorating, and more.
If you haven’t started working with retailers yet, you MUST find out what the potential margin will be, on average, in your country/territory. You need to find out what retailer margins to expect.
Our Pricing Your Products for Profit by Using a Price Structure module will help you gain confidence when calculating profit.
Inside, you’ll find easy-to-follow formulas for calculating margin and markup, so that you know what to expect from retailers and where you stand in their pricing offers. It’s an essential part of making your own skincare products to sell.
To access this module, you will need to complete all previous modules of the Natural Cosmetic Formulation Club’s How to Price Your Cosmetic Products for Profit.
Modules one, two and three go into detail about everything you need to know about pricing your natural and organic skincare products in a simple, easy-to-understand way.
Module 4 brings everything together that you have learnt from the course enabling you to confidently calculate all the different prices and margins you need to make a profit on your natural and organic cosmetic brand.
You will learn about price structures and frameworks used in selling homemade cosmetics, so that you can:
- Set the right pricing for your items (retail and wholesale).
- Make a profit.
- Know what your maximum retailer margin is.
- Know what your marketing budget is.
- Understand where your pricing is off (if you are not making any money).
Sign up for the course, and you will have exclusive access to our Price Structure Calculation spreadsheet, which can help you to:
- Work forwards from a total product cost to decide on a reasonable RRP.
- Work backwards from a target RRP to see what target total product cost you want to achieve.
- Play with different retailer margins to see what the maximum is you can offer.
The Natural Cosmetic Formulation Club’s How to Price Your Cosmetic Products for Profit will support you throughout the rest of your entrepreneurial journey, helping you to make a profit on every sale.
If you are interested in becoming a Member of the Natural Cosmetic Formulation Club, click here for more information.
If you are already a member and you realize Pricing Your Products for Profit by Using a Price Structure is the answer to your pricing woes, click here and start the full How to Price Your Cosmetic Products for Profit course today!