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Print-on-demand (POD) is a form of e-commerce in which vendors sell customized made-to-order products featuring their own designs that are manufactured and shipped by a third party. POD vendors list designed products in their stores and when a customer orders something, a third party prints and fulfills the order. POD products can include clothing, books, engraved jewelry, mugs, wall art, and many other items.
POD reduces the entry barrier into the world of e-commerce as vendors do not need to pay for products until a sale has been made. This means that vendors do not need to buy in bulk or hold inventory.
Pricing Print-on-Demand Products
Pricing any product is based on how much it costs to create the item and how much it will ultimately be sold for. Because the goal of every vendor is to make profits, it is essential to consider all fixed and variable costs in setting the price of your POD products. Pricing also affects how well your store performs among the competition and how much profit you can make.
Here are some considerations to keep in mind when setting prices:
- Assess Your Product Cost
This is the most important step for a print-on-demand business when setting prices. Because pricing goes a long way to determining the success of your business, it is crucial to dedicate time to assess all the costs involved in creating a product. The costs to consider include:
- Design Cost: To determine the print-on-demand design cost, divide the total cost of designing by the number of products you plan on selling. Because you cannot always accurately predict how many products you may end up selling, you need to calculate how many products you need to sell to break even. The minimum number of orders you need to sell can be calculated by dividing the design cost by the profit margin. So, if you pay $100 for a design, and your profit margin per item sold is $20, you’ll need to sell 5 items just to cover the design cost.
- Production Cost: The production cost is the cost charged by the print-on-demand supplier for each item. This is part of the beauty of the POD model; the cost per product is determined by your supplier so you don’t need to worry about costing out tons of production steps and you can predict profits with high accuracy.
- Shipping Cost: Although POD providers ship products for you, it comes at an extra cost for customers. The shipping cost will vary based on your product, fulfillment location, and end destination. However, you can offer free shipping—which usually results in four to five times more sales—by incorporating shipping costs into the price of the product. The final price in this scenario equals the retail price plus the provider’s shipping cost.
- Platform Fees and Taxes: These are two costs that many people fail to consider but can significantly affect your profit margin and sales. Depending on the customer’s fulfillment location, your provider may charge sales tax on the order. Because this cost is variable based on location, it is recommended that you consult a tax specialist to give you an idea of how to manage this issue. In some cases, you’ll have to consider the transaction fees charged by your platform as well.
Also, depending on the platform you use, there may be additional fees for setting up and running your online store. Check for additional monthly costs that might be assessed for running your business, and determine beforehand if you want these fees to be included in the retail cost of each product.
- Add a Profit Margin
After accurately determining the product cost, the next step is to add an amount that will be your profit on each product. Make sure the total product cost to the customer matches or beats your competitors. Generally, 30% is considered a good profit margin for POD. However, the profit margin can be lower or significantly higher depending on the niche, the product sold, and the target market.
- Compare Competing Prices
When all costs have been folded into the price of your product, you need to check the average price offered by other sellers in our niche. Knowing how much they charge will help you determine if you need to re-price your products higher or lower. Product research for dropshipping can give you an idea of how much competitors charge for their products.
If you see competitors charging substantially less for a nearly identical product, you don’t need to race them to the bottom. With the right sales and marketing approach, you can still achieve your desired profit margin (to a point) even in a competitive market.
Review Your Pricing Regularly
Pricing is not a decision you make once, and it should be reviewed regularly. You may need to re-price to cover the rising cost of production or as a selling tactic in your overall marketing strategy.
