How to Price Your Products for Retail
By Cath Waters, Founder of Lochside Print Co
Here’s our artist-friendly guide to pricing your products for retail.
At Lochside Print Co, we’ve helped lots of artists and photographers turn their ideas into profitable merchandise.
Calculating prices was one of the hardest things to get my head around when I started selling my own art 15 years ago. I found it daunting, putting a value on things I created.
Finding that pricing sweet spot is really hard.
This blog post is part one of a series on how to calculate your product prices. We will cover pricing for retail in this one, and I’ll follow up with another post on pricing for wholesale and how to add VAT in the mix.
1) Know Your Costs — Every Single One
Before setting any prices, you need to understand what it costs to create each item. Be thorough and realistic. There are two components to consider:
· Direct Costs are costs associated directly with your product. For example:
- Item costs — what you pay your supplier (like us!)
- VAT (unless you are VAT registered and can claim it back)
- Retail packaging — sleeves, boxes, labels, swing tags etc.
- Shipping costs
- Direct Labour — for example, if you pay production staff or are making the product yourself. If paying yourself, include a realistic hourly rate.
- Selling fees (e.g. Etsy, Shopify, Card Payment Fees)
· Business overheads also known as indirect costs are costs to the business but not directly associated with a specific product. Some are fixed and some may vary from month to month. For example:
- Website hosting
- Insurance
- Creative time
- Admin time
- Design software subscriptions
- Utility bills
- Studio rent
- Advertising
- Craft fair table fees
2) Combine your Product Costs and Overheads to get your Base Cost
You need to calculate a % overhead rate to add to each product. For a home based, sole trader with minimal business outgoings the overhead cost might be around 10%. For a larger business e.g. with premises, staff, trade fair costs and a marketing budget, overheads might be 20-30%.
Calculating an accurate % overhead can be a bit of a dark art, but these costs are part of running your business and should be reflected in your product prices, even if only by a small percentage per item.
To incorporate your overheads into your pricing per product you should divide your overhead costs by your direct costs for the same period and multiply by 100 to get a percentage. If you are just starting out, you will have to estimate some of your overheads.
Example figures:
Direct costs for 1 year = £10,000
Overhead costs for 1 year = £1000
Divide your overheads by your direct costs and multiply by 100 to give a %
So, (£1000 / £10,000) x100 = 10%
In other words for every product you make or buy, you need to add an extra 10% on to the selling price to cover your business overheads.
Putting all this together:
You pay £3.30 for each mug
You pay 20% VAT £0.66
You add a swing tag £0.04
>TOTAL DIRECT COSTS = £4.00
Add your overhead rate which is 10% (£0.40)
£4.00 + £0.40
>MUG BASE COST = £4.40
NOTE: VAT is a cost in this calculation because we are assuming you are not VAT registered and you can't claim it back. If you are VAT registered you would claim the VAT back and would not include it as a cost.
Now you've got your base cost for that product. This is the product breakeven point and everything you make above this amount is profit!
3) Add a Sustainable Mark-Up to Make a Profit
Profit isn’t a dirty word — it’s what keeps your business growing and feeds your family!
For artists and small-batch makers, a 2-3x markup on your base cost is a good balanced starting point for retail. It gives you lots of wiggle room if you want to raise or lower your prices or factor in a wholesale price.
I’ll use the above example of your mugs printed with us at £3.30 each but the same formula can be applied to many more of Lochside Print Co. products like wall art, coasters or tote bags.
We calculated that your base cost including your direct costs and overheads is £4.40 per mug.
Now apply your mark up calculation. We will use a 3 x markup for this example.
BASE COST x MARKUP
£4.40× 3 = £13.20 APROX RETAIL PRICE
I would sell each mug for £13.00 to give it a round number
NOTE: If you are VAT registered you would need to add 20% VAT on to your retail price but your costs would also be lower. I will write a post specifically about VAT soon.
4) Understand Mark-up vs Profit Margin
Mark-up is a factor applied to your costs. Profit margin on the other hand is calculated based on your selling price (revenue) and is the percentage of your selling price that is kept as profit.
Based on the mug example, we can work out your profit per mug.
Selling price for a mug = £13.00
Base cost = £4.40
£13.00 - £4.40= £8.60
You make £8.60 profit on each mug
Margin equals profit divided by sale price, times 100
So, (£8.60/£13.00)x100 = 66%
You have a healthy profit margin of 66%, in other words you keep 66% of the revenue from selling your mugs. The remaining 44% of the revenue covers your costs.
5) Remember it's important to value your work
You can of course choose a higher or lower margin, there are no fixed rules, but this pricing strategy gives you room to cover your costs, pay yourself fairly, and make a profit which can be used to buy more stock, or whatever your business needs to grow.
Your golden rule should be Don’t Undervalue Your Work!
It’s tempting to slash prices to “be competitive” but remember your art is unique and desirable — you're not selling mass produced goods.
The quality and provenance of your products, your unique and distinctive art and your own personal story all add so much value. Communicate those clearly — on your packaging, your social media, and in your conversations with customers and you will find people are more than willing to pay a fair price for your products.
Don't stress when you meet the occasional (rude!) person who says “Oh, I can buy a cheap mug on Amazon for £5.99”. People who can't see the unique value in your creations are never going to be *your* customers. You don't need to compete with the prices they pay.
6) Test, Learn, and Adjust
Pricing isn’t fixed forever. Try different price points at markets, online, and on different retail platforms. Track what sells fastest and what feels right for your customers — and your profit margin. Listen to feedback.
It's good practice revisit pricing every 6–12 months to stay in line with costs.
Summary
Pricing your products for retail is all about understanding your true costs and valuing your time and skills.
At Lochside Print Co, we’re here to help you every step of the way. When we consider printing a new product, we always ask ourselves, can our customers make money from it? We keep our costs competitive without compromising quality — leaving space for a healthy profit for your business.
If you need any help with pricing products you have bought from us, do get in touch.
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