Sarah from Boutique Hub explains why you shouldn't just double your costs. Instead, figure out what customers will actually pay, then work backward to cover your expenses, markdowns, and profit. A $10 item might retail for $20 or $30 depending on your market.
Hey guys, it's Sarah with the Boutique Hub and I'm here today to answer another one of our frequently asked questions. How much should I price my inventory at? What should my markup be? Well, guys, that is up to you. It's up to your business. It's really up to how profitable you want to be. All retail really is, is buying low and selling higher, right? It's important that we're making money. That's why we got into this business to begin with. So that's okay. Get your mind set around the fact that it's okay to make money. If you're not making money, you're not in business. So when the question is asked, how much should I charge for my inventory? What should I price my inventory at? I beg you, get it out of your mind about this keystone markup. Get it out of your mind about the cost based price pricing. I'm a big advocate in the first question you ask yourself is what will my customers pay for this? That's the most important thing. Then you can go back and answer a few other questions about when is it available? All these kind of things, Is it the right size, is the right color, the right cut, all that, is the fit going to be perfect? Then ask about the cost of the item. Right? That's the last thing. With that information, all of those things combined, you can honestly answer to yourself if it's a good investment for you to make into your business. Because as we always say, being a good buyer is a science, right? It's not luck. There's a lot of players that go into this. But making sure your markup can absorb three key things is pivotal to your business. If you cannot absorb the cost of your expenses, any markdowns, and your profit into your markup, you're not going to make it. So again, let me repeat that. Your markup needs to absorb three things. Your expenses, including that cost of the item, the potential markdowns, because those are inevitable. We'll talk more about that in another video. Markdowns are just part of retail and thirdly, your profit. So I guess to go back and simply answer that question. How much should I price my items? How much should I mark them up? That depends on how profitable you want to be. It really does. But let me give you a little bit of an example real quick. Say you have a $10 item. That's what it costs, $10. Right. And if you're sticking to that, I'm a two time markup, I'm that keystone markup person. So I'M going to price that at $20. If you want to bring in $100, how many of those do you have to sell? You have to sell 10 of them, right? Because you're actually only. Your markup's only $10. So you have to sell 10 of them to make 100 bucks to bring in $100 before you even pay for your goods. Now think of it this way. That same $10 item that you charged $30 for, how many of those do you need to sell to make that Same hundred dollars? 5. So it's half as many to make the same exact amount of money. So I ask you, would your customers pay the $30 for that $10 item? If you think they're maxed out at $20, then I'm going to say it's probably not the best investment. Then it's time to shop around and look for something else. If they're only going to pay $20 for that item, is that markup enough to absorb the expenses, the markdown and your profit? That's your question to answer. I can't answer that for you, but at the end of the day, we want you to make money. We want you to be profitable. We want you to have more money to turn back around and invest in more products to continue to make money. That's what retail is all about. So that's my tip for you today. Stop worrying about what it costs, right? Start wondering, what is my customer going to pay for that? What would my customer be willing to give me for this item? Based on that, you can start making some real sound decisions in your store. You can make some real sound decisions on your markup and start seeing the cash coming in in a healthier business. Alright, guys, for more information on this and more tips and tricks about merchandise and inventory planning and markup, click the link below. In the meantime, if there's something else that you have a question about, please don't hesitate to reach out and ask. Here at the Boutique Hub, we're all about education and providing opportunities, networking and collaboration with other members. But at the end of the day, it's all about making you the very best retailers you possibly can be. All right, until next time. We'll see you later.
