Pricing merch is not just cost plus a random markup. A useful price has to cover the product, the cost of selling it, the risk in the stock, and still leave enough margin for the project to make sense.
01 / START WITH LANDED UNIT COST
Build the cost of one sellable unit, not just the blank garment.
Include where relevant: - garment or manufactured product - decoration - labels and trims - packaging - inbound freight - fulfilment materials - payment fees - venue or platform commissions - damaged or unsellable stock allowance
The aim is to answer one question: what does one unit really cost before profit?
02 / SEPARATE MARKUP FROM MARGIN
If a product costs £10 and sells for £20, that is a 100% markup but a 50% gross margin before other selling costs.
Gross margin = (selling price - direct cost) / selling price × 100.
Understanding the difference prevents founders from overestimating profitability.
03 / PRICE FOR THE CHANNEL
The same product can have different economics online, at a show, through wholesale, or inside a brand activation.
Direct-to-consumer retail can support a different margin from wholesale because wholesale leaves room for the retailer. Live merch may also involve venue commissions or additional staffing and payment costs.
04 / CHECK THE MARKET WITHOUT COPYING IT
Benchmark comparable products by quality, positioning, audience and garment specification. Do not compare a heavyweight cut-and-sew hoodie with a lightweight promotional hoodie simply because both are hoodies.
Your customer is judging value, not your production invoice.
05 / BUILD A PRICE LADDER
A merch range often works better when there are several entry points.
Example structure: - lower-price accessory or entry product - core T-shirt - premium hoodie or hero product - limited or specialist piece
This gives customers different ways to buy without forcing every product to hit the same price point.
06 / MODEL DISCOUNTS BEFORE YOU OFFER THEM
If your product only works financially at full price, a 20% discount can destroy the economics quickly.
Test launch offers, bundles, staff codes and end-of-season discounts before publishing them.
07 / DO NOT CONFUSE REVENUE WITH PROFIT
Selling 100 units at £40 creates £4,000 revenue. It does not mean the project made £4,000.
Subtract direct product cost and then account for relevant sales, fulfilment, marketing and operating costs.
08 / THINK ABOUT VAT AS YOU SCALE
If VAT applies to your business, pricing needs to work with VAT included rather than only at an early-stage non-VAT position. Check current HMRC rules for your circumstances.
09 / PRICE THE FINISHED PRODUCT
Customers are buying the finished item: garment, print, fit, story, packaging, experience and brand. Cheap production does not automatically mean a low retail price, and expensive production does not guarantee customers will accept a high one.
10 / USE A SIMPLE TEST
Before approving production, model: - unit cost - selling price - gross profit per unit - gross margin - break-even units - profit if 50%, 70% and 100% of stock sells
The sell-through scenarios are especially important because unsold inventory is still cash tied up in product.
MERCHMODE VIEW
The right retail price is the point where product value, customer expectation and viable unit economics meet.
Do not ask only: how much can I charge?
Ask: does this price make the product attractive and the project sustainable?
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