Boutique Chat #223 | 7 Ways to Get More Bang for Your Buck When it Comes to Pricing Your Products

It is episode 223 and it's just me. It's me solo, but I've got a lot of stuff to cover, so bring your notebook today, you guys. It's going to be a busy episode. Let's talk about your business strategy and the juicy details of what actually works from mainstream fashion to fashion on Main street and the entire ecosystem behind it. How do we scale your company and do it with the balance and the happiness that we all seek? Let's hear from those inside experts and strategists that actually make it happen. I'm your host, Ashley Alderson from the Boutique Hub, and I can't wait to chat. Hey, guys, let's talk about numbers today. Specifically the numbers that make you really excited. You know, the ones that actually leave money in your bank account at the end of the day and that is price. Now, I know there's a lot of misconceptions in our industry when it comes to how to price your product. Some of you have probably heard of the old standby keystone pricing, which is kind of like letting John Wayne try to run your business. It frankly isn't going to work in today's age. So today I want to give you seven ways to get more bang for your buck when it comes to pricing your products. Now, whether you are a new store or an established store or a growing and scaling store, I think there's going to be tips today that are going to help you think about this process that you go through with your products and how you're tracking your inventory that are going to help you keep more money in your pocket and increase that overall profitability of your business. All right, let's dig into it. I know you don't have time. Let's just cut right to the chase. Right? All right, tip number one, anytime you're thinking about pricing your product, let's avoid this idea of cost based pricing. Now what's that mean? Cost based pricing is again, that old keystone. John Wayne says that I should sell this product for a 2 times markup. And the fact is, if you're going with cost based pricing and just using a formula, whether it's 2 times or 2.5 or 2.73, if you want to get technical, you're probably going to leave money on the table. So when you're at market or you're shopping around with your favorite vendors online, rather than the first thing you do is look at the price, I want you to look at the product and ask yourself, number one, who's this for? And if you can't come up with a number of customers that you know are going to go crazy for this item, and maybe it's just you personally are going to go crazy for the item, put the dang thing back immediately. You should be able to think of customers and who's going to want this right off the bat. Then number two, I want you to ask yourself, what can I sell this for, right? What is this product actually worth? What kind of money could I physically get out of this product? And only then after you've asked those two first questions do you go back and actually ask, okay, what is the wholesale cost on this product and what can I mark this item up to be so that I can get sufficient enough margin out of this product to make it worth it? But don't start with a cost alone and go right into that formula. Now, I know it also takes a lot of time to do any kind of market research on what other people are selling similar products for, but I know how many of you are surfing around on Instagram every day, so you have a pretty darn good idea of what that item is selling for in other stores. Now that said, I don't want that to make you go, okay, I know that the Pink Lily boutique is selling it for X amount of dollars. I better sell it for the same or I better sell it for a dollar or two under you guys. Your business is your business and you've got to sell the item for what you've got to sell the item for to make your business succeed. Keep in mind that there's other boutiques that might be selling similar products to you at a different price because maybe they bought such volume of that product, they got a discount, or maybe they have a different business model than you do. But at the end of the day, your business has to pay your bills and your customer isn't going to know or really care, frankly, if they can find it one or two dollars cheaper elsewhere. And if they do find, fine, let them go buy it there because your customer wants to do business with you. The customers that are going to stick around going to increase your customer lifetime value. The customers that are going to be loyal, they're there because they like you, they trust you, they think you get them, they like your style, or there's something about your business and the convenience of your business that's going to bring them back to you again and again versus them just price shopping around asking for a Walmart price match guarantee at other types of boutiques. So stick to your guns. What does your price need to be for your business and not based on some silly formula? Now also keep in mind, I guess if you're new here, when it comes to that pricing formula and what can I sell this for? Typically your jewelry and accessories are going to have a higher markup than your apparel is. And when it comes to buying off price, I know some of you are familiar with off price, some of you aren't. Every vendor has overstock. Just like in your business, you have onesies and twosies and things that you mark down at the end of a season. Well, your vendors do too. So a lot of times those products will go to third party companies, they'll go to an off price show, or some of your vendors will allow the sale of those markdown items to you directly. Once you've started to establish that you've got a great relationship with your vendors, then you can start to ask them for okay, where's your markdowns? Where's your overstock? Are there items that you can start to bring into your business, especially during the third and fourth quarter when you've got a lot of promotions coming up that you can buy slightly less than wholesale but still get a good markup and margin out of? When you're looking for those Black Friday door busters, you're probably not going to go for the most, highest price, freshest, newest product, but you're going to go for something that you got a really good deal on so that you can mark it down 25% off but still get your normal margin, 55, 65% out of that product. So consider what can I sell this for and how much margin can I get out of this product versus that cost based pricing. Tip number two, cheaper is not better. And do you guys use this saying? I always use this saying I'm sick of beating a dead horse and sounds quite morbid I think. But the point is I'm going to repeat myself here and I'm going to continue to beat this message again and again because I want to make sure that we're all on the same page. Consumers today have the convenience of going to Walmart and to Amazon and they can go price match wherever they want. But from its earliest existence, boutiques were not created to be the bargain bin. Boutiques were always popular throughout history because of what they offered that was unique and special and different. Boutiques have historically always offered a unique curated selection based on a demographic or a geography or a certain specialty. Whether you dress curvy women or you dress more petite women or you dress women that are western or have a specific style. It's curated to that specific group of people. So when it's curated, oftentimes you're going to pay a little bit more at a boutique because you're paying for a specialty collection and you're paying for the service and the quality that comes along with it. Now, unfortunately, today in our industry we have this huge movement of bargain bin boutiques where it is bottom dollar, cheaper is better. They're selling frankly, a lot of crap that is an overseas China knockoff. And as much as I've watched this happen in the last probably three years, I can tell you that a lot of the boutiques that I started watching back then that were doing this are gone by now. Because you can't put dinner on the table when you're running a bargain bin, right? You can't bring in a couple products and mark them nearly at wholesale and turn them and waste your time for that long. Pretty soon something's got to give. Whether it's your pocketbook or your relationship with your kids or your doubts from your spouse about if what you're doing is actually worth your time or not, at some point those businesses are going to cease to exist. And again, what's going to remain is what the boutique is and will always be, a quality curation of products that fit your ideal demographic of a customer. So know that cheaper is not better in this industry. And if people want to be cheap, they can go to Walmart. But Walmart shoppers are not loyal, right? They're going to price hop around wherever they can get the latest coupon. The customers that are loyal are the ones that you serve. So when it comes to pricing, making sure you know your customer and you know her well, you know how to speak to her, build a relationship with her and serve her, that's going to allow you to price a lot smarter so that you can actually build margin into your business to pay your bills and build something that is long term sustainable. Now I always talk about this, especially in retail bootcamp, about the importance of building value into your prices. And I know I use this in a previous episode, talking about how my kids no longer are in the spit up stage of life, right? So I don't want a $20 thing that I'm going to throw away after it gets spit up on once I want something that's a little bit better quality. So as you're marketing your products and you're building a brand for your business, be really careful about how are you building your brand. Are you building something that is primarily fast fashion, cheaper is better, or are you starting to build in messaging about how many ways can I wear this item, how many times can I wash this item, how are the buttons sewed onto this, what's the stitch, what's the hem, what's the fabric, what's the brand name and the demand behind this item? There's a number of ways we can really create quality demand in our business. But it comes down to marketing that now a lot of you are doing live sales, right? Or you're doing boutique owner picks, whatever the name of your boutique show is on your Facebook and Instagram channels. Well, every week you have that opportunity to talk about the quality of your products. And yes, it's X amount of dollars, but you're going to get to wear it so many different ways. Now, ideal price is where the idea of pleasure, of the increased perceived value of a product outweighs the idea of pain of letting the money go out of your pocket. Let me repeat that. Ideal price is where the pleasure of the perceived increased value of a product outweighs the pain of letting that money go out your pocket. Right? That's where price is ideal. So it's not always the cheaper is better, but the more quality we have, that's where that ideal price is going to come into play. So what is that tipping point for you and your business? What is that ideal price that your customer is willing to pay for shopping with you, building a relationship with you, and having that unique customer service that only you can offer? Tip number three, let's talk about markdowns. So many of you are pricing a product going back to this misconception of cost based pricing, but not considering that once you sell through 50% of that pack, primarily in the last couple of months, you've been having to mark down those last three to four pieces. Now, if you've been tracking your maintained markup over time, you would start to notice a trend right where your margin is decreasing because of those markdowns on those last few pieces of product. So when you're pricing, you have to keep in mind you've got to also put price for markdowns. Or if you're going into a season where there's going to be some specials and discounts and sales like the third and fourth quarter, make sure you're building that into your price because your price can always come down. But it's pretty dang hard to build your price back up again. So make sure you start high. And if you have to Mark down. You mark down quickly and significantly so you can move those products out fast. Number four, what's your sell through and your turn rate on specific categories of products? So if you've calculated your turn rate, which we've been working on this, again, a ton in retail bootcamp, if your turn rate is too high, right. You're selling through items too fast. That means your products are priced too low. If your turn rate is too low, meaning you're not turning fast enough, that means your prices either need to be adjusted or you need to start remarketing your product. So once you have that turn rate and you know, okay, is this too slow or is it too fast? And how can I adjust accordingly with my pricing or with my marketing? Now you're going to have a better idea of what's ideal for you and your business. And it kind of goes back to this idea of content overwhelm. We'll get these new products in, we'll style them, we'll throw them up on Instagram, throw them up on Facebook, we'll pin them to Pinterest once, and then we'll come back and go, oh, crap, why didn't this sell? And then we'll think about marking it down. But I invite you, if you aren't already going back with a strategy of going, all right, here's my aging report on a Monday morning. Here's what I know is aged, and here's the stock I have left on hand based on what's aged. Now I know, dang, these items didn't sell. Maybe I need to take a new picture. Maybe the flat lay I did on that item didn't do it justice, and I need to restyle it, reshoot it, and repost it. Once you've gone through that process every week, now you're really starting to look at how to get more margin out of those products each and every week versus going up. Didn't work. Mark it down and move it out. Create a system. So you're looking at an aging report and you're going through, and you're asking yourself, why didn't this sell? And then you're marketing it in a new way. Because we kind of get content fatigue, to be honest. You know, we see new pieces come in as boutique owners, and we're so excited every week for those new arrivals, and we start to think, gosh, we've created this content. Our customers surely have seen all of this, so they must not like it and they must not want it. And I'm just gonna take a discount on it. But the truth is, our content is fatiguing our customers. They see so much on social media every single day that they miss half of what we post. So the nice little sweater that you're wondering why it didn't sell well, maybe it's because your customer didn't see it and you need to reshoot it. Or maybe your photo was of a bad angle or bad lighting, or the item had so much detail that just really didn't come through in the photo. How can you remarket that to your customer so she can see the value now decide that she wants it? Tip number five. You know what they say about the word assume, right? It makes an ass out of you and me. So don't assume that you know what your customer is looking for when it comes to price. You know Sarah Burks, who's our director of partnerships and education at the Hub in Retail Bootcamp, I love this story that she tells. It's about her storefront in Wisconsin. How a gentleman came into the store and came in primarily over the holidays, and he was a mechanic in town and he would come in to the store over the holidays ready to buy something for his girlfriend, and he was covered in grease from head to toe. And Sarah tells a story about how one of the sales associates kind of took a look at him and when he came in to buy the items, they had some barefoot dreams. I think it was blankets. I can't remember. I'm going to butcher the story. But Barefoot dreams is a pretty high priced brand, beautiful quality, right? Maybe it was a sweater, not a blanket, but they had this barefoot dream sweater that was like a, you know, $200 item. Whatever it was, it was spendy. And the sales associate just bypassed that item. When the gentleman said, hey, you know, what's this? Tell me about this product? And she's like, ah, you don't really want that. You know, that's a $200 item and kind of passed judgment, like it's expensive, so you won't want it. And the gentleman was like, no, no, no, no, no. That's exactly what I want. I want that and these other items as well. Now, the point is, it's really easy for us to project our own money story onto other people, our own perceptions about what people can and cann on our personal life experiences. It's easy to put that on somebody else just because you think someone can't afford it. You don't always know that unless you ask, right? So start to build the value of items up in your customer's mind, right? You don't sell it unless you show it, offer the products and let your customers decide what they can and cannot afford or what they do or they do not want. Don't try to decide that for them. Tip number six, pre orders and buy ins are a bad idea. So many times in our industry, boutique owners get started and go, you know what, I can't afford that item yet so I'm just going to run a pre order on it. Honestly, a lot of times it's a cheap piece of crap that they're trying to order from like Alibaba or Aliexpress and they've never actually held the product in their hands and they run a pre order for it and the item doesn't come in for the next eight weeks and their customers are mad and, and once item comes in it could fit a friggin Cabbage patch doll and not a human body, right? So customers are mad and it's just ruined the brand reputation of that boutique. So please know buy ins and pre orders are not going to serve your customer. Your customer deserves to know that the product she's ordering is something you have on hand that you've already done a quality control check on. You've touched it and felt it and you've tried it on your own body. And that's also going to help you sell more of those items, right? Because when you go live and you do your fit video, you're going to go, hey, I am a mom with a baby belly and this is how it fits on me. I would wear this top with mid rise jeans because it's a little bit shorter and you can tuck in that muffin top, right? You can walk through all the ways that product fits. And now your consumer is going to have so much more confidence and they're going to want to actually buy the product. Don't waste your time running a pre order on a piece of crap that you've never actually seen before. All right, finally, tip number seven, we're blowing through this list. Tip number seven is work with brands that want to build a partnership with you. Look for the brands that want to create a working, lasting, growing relationship with you. And it might be showroom reps, right? It might be better quality brands, it might be unique makers and artisans, it might be your fast fashion brands that you're actually going and building a relationship with all of their reps while they're at market. But look for the brands that want to create that lasting relationship, whether that's creating area protection or creating map pricing so that again, the people that are running the pre orders and the cheap buy in groups aren't coming in and undercutting you, right? Look for the brands that you know also have your back because those brands also know cheaper is not better. They want to see you succeed so they're going to set you up with tools and terms that are going to be a win win for an eternity into the future. Now you're also going to ask yourself, gosh, again, why do some of the bigger boutiques have better pricing on some of these items? And again, that's because they're able to buy in bulk. And once you have created a relationship with your brand or your showroom or your rep over a period of time and you're showing that this item is selling through, you're able to grow in how much quantity you're able to order. Don't be scared to ask them, hey, do you have any deals in specials? And it specifically, if you're a boutique hub member and you're going to market with our market must see list which has all of our 600 plus brands that are members of the boutique hub listed, man, I would bet. I was just looking at our most recent must see list. Probably like 50% of our member brands that are showing at market, primarily Dallas, Atlanta and Las Vegas are offering a special or a discount to boutique hub members. So if you're looking for again ways to increase your margin, go and work with the brands that are really trying to create that relationship with you and want to offer you that discount as well. A lot of the boutique member brands will offer free shipping or show special a perk on an opening order from a new brand they might be carrying. The point is, do your homework before you get to market and look for the brands that are willing to stick their neck out and to build a long term relationship with you. Alright guys, hopefully you picked up a couple of tips today that are going to help you put more money in your pocket at the end of the day. You know, pricing is probably one of the most important things that we do on a daily basis in our boutique and I would hate to see you guys leaving money on the table where you have an opportunity to really capitalize on all the hard work and effort that you're putting into your business. You know, you've made the sacrifices of leaving your family and going to market. You've made the sacrifices of having payroll and hiring a team. You've done all the work with the marketing, but if your pricing isn't right and you aren't getting that margin out of the products, man. What's it all for at the end of the day? Because if you aren't able to build a business that's profitable and sustainable, we're really spinning our wheels. So I hope you consider these tips. I'd love to know if there was one of them that was your favorite or maybe the one thing that you heard today that you're going to take action on. Make sure you message me over on Instagram @ajalderson and I'd love to hear what you're going to take action on so I can keep you accountable. You know, a while ago I'll tell you this quick story. A while ago Eric and I were talking about podcasts because I am a podcast junkie. But what I found myself doing was I was listening to all these podcasts and getting all jacked up with all these ideas but not having enough time to actually take the ideas I was hearing and implement them. So we put on a strike of no more listening to podcasts until I could go through and implement at least one action item from the latest podcast that I've heard. So I challenge you to do the same thing, whether it's last week's episode or this week's episode. Let me know what's the one action you're going to take after hearing today's show and tell me. I'll be your accountability buddy or post it in the Boutique Hub members Facebook group. I want to see what you're doing and what results result it's going to give you in your business. Because frankly, that's why we're all here, right you guys, thank you so much for listening to this show each and every week. I'm humbled to get to bring you this content and I really truly hope it does help you, your business, your team, your family and your community. I hope you guys have an awesome rest of your day and we'll see you next week. Hey guys, thank you so much for listening to this episode. We hope that you you loved it. Don't forget to hit subscribe and leave a rating and review down below for a chance to be one of our featured listeners each and every week. For more information on our spirit of community over competition and how to access complete show notes and bonus downloads from our guests, head on over to theboutiquehub.com and join the community. We'll see you next week. It.