A healthy merch project starts with understanding margin properly. Revenue, markup, gross profit and net profit are not interchangeable.
01 / GROSS PROFIT Selling price minus direct product cost.
02 / GROSS MARGIN Gross profit divided by selling price, expressed as a percentage.
03 / MARKUP The percentage added to cost to reach selling price. A 100% markup does not mean a 100% margin.
04 / NET PROFIT What remains after wider business costs such as staff, marketing, software, rent, tax and other overheads.
05 / WHY MERCH MARGINS VARY Margins change with garment quality, decoration method, order quantity, packaging, fulfilment, sales channel and discounting.
06 / LIVE MERCH Artist and event merch may also carry venue commissions, card fees, staffing or transport costs. Model these before setting price.
07 / WHOLESALE Wholesale requires enough room for both the brand and retailer. A direct-to-consumer price that works online may not leave sufficient wholesale margin.
08 / SELL-THROUGH MATTERS A theoretical 60% gross margin means little if half the inventory never sells. Model profit at realistic sell-through levels.
09 / IMPROVING MARGIN WITHOUT MAKING THE PRODUCT WORSE Look at production quantity, print specification, garment choice, number of print locations, packaging and fulfilment efficiency before simply choosing a cheaper blank.
10 / THE MERCHMODE RULE Do not optimise for the lowest production cost. Optimise for the best relationship between product quality, achievable selling price and sell-through.
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