Tuesday, May 8, 2012

Pricing Pillows

I'm super fair in how I set my prices. I earn a decent wage for my design and weaving time. Careful tracking of my hours for three years of production weaving tells me that the cloth needs to sell for $50 a yard wholesale or $100 a yard retail. When I make a mistake like I did on the blue beam, it takes longer and I earn less. It's not the customer's fault that I made that mistake. When materials cost more, like on the black cloth, the price only increases to cover the cost of materials and no more.

I have put the line of throw pillows into production to convert small pieces of cloth into merchandise that can be sold. One of my background goals is to reach new markets with them and make sure that they are profitable enough that I can afford to make lots of them if they're a hit.

In the last month, I've pulled my garments from all of the galleries that were showing them because they just don't sell in that environment. People seem to visit galleries for art and not garments. There are other galleries that specialize in housewares. I am rolling out the pillows alongside a line of sofa throws with the hopes that these items are more readily understood by customers and embraced by designers.

But I've been so busy with show prep that I didn't take the time to cost them out. To be fair to myself, I also didn't know what the costs were going to be until I was well into the process of making them. This is partly due to cashflow. I hired the seamstress to design them before I had the money to buy pillow blanks, for instance.

Well, now that I've got the numbers and ran a quick cost calculation, I realize that I'm kind of in trouble.

1. If I want to be paid my full rate for weaving the cloth that's going into the pillows and charge full markup on the materials and labor to make them, they need to cost $30 each or $50 a pair. This is too much for a 12" throw pillow.

2. If I don't get paid for my weaving but charge full markup on labor and materials, the cost drops to $16.50 each or $28 a pair. This is unsustainable.

3. If I charge full price for the weaving and charge no markup on the labor and materials, they cost $20 each or $35 a pair.

You'll notice in the last option that I am fiddling with the retail price calculation. This is kind of bad. It means that I must sell all of the pillows myself. They cannot be sold through galleries, showrooms, interior designer specification, or anything else and still be affordable.

My plan for now is to sell them myself, using pricing model #3 until I can find outlets who can charge the prices in #1. When they start to move at those prices, I'll increase the prices in my booth to match.

The Loss Leader

I'm starting to realize that these pillows are a thing that stores call a loss leader. They are not as profitable as other items in the shop, but they draw in customers who might not have stopped otherwise. The other thing that makes them work is LOUD, CLEAR ADVERTISING of the fantastic deal to be had on these items. It's what grocery stores are doing with the 3'x4' painted signs in the front windows. For the first time in my booth, I'll be hanging advertising signage to grab people's attention with a low price and get them in the booth.

Another part of the equation is the length of the sales cycle. At the next few shows, I'm going to need to learn how to sell cheaper items faster. I'm hoping that this happens naturally, that people don't need to spend as much time thinking about a $35 purchase as they do a $300 one. I'll also be streamlining the checkout process for increased inventory accuracy and accurate calculation of volume discounts. (one for $20, two for $35, four for $60)

More on the checkout process later...

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