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Pricing Strategies for Private Label Skincare

One of the biggest challenges for new skincare business owners is what to charge for their products. When you take the private labeling route, determining the right price point is critical.

The truth is you can’t just drive down the price of your products in the hopes of beating your competitors. Remember that the price of your product determines the market you’ll be interacting with. Furthermore, it affects the perceived value of your brand.

To help you out, here are some strategies that can help you determine the right price point for your private label brand. Let’s get started.

Start with Your Landing Costs

Landing cost refers to the cost of creating your product plus all the other expenses you incur to get it to your customer. In other words, this is your manufacturing cost, shipping from the manufacturer to your warehouse, and shipping to your customer. You should also factor in distribution costs if you’re selling in retail stores and if there are fees associated with selling on certain platforms.

One way to lower your landing cost is to purchase materials in bulk and to manufacture products in bogger quantities. However, many skincare products have a set shelf life. This means you need to be able to sell your inventory, otherwise, you’ll run the risk of wasting capital and losing profits.

Indirect Cost

Apart from landing costs, your skincare business can also incur indirect costs or fixed overhead costs. This includes all of the expenses needed to set up your business including insurance, website maintenance, electricity, renting office space, and salary for your staff.

This should also be factored in computing for your product prices.

Suggested Retail Price and Profit Margin

A general rule when pricing private label skincare is that your profit margin should be at least 33 percent. However, the cost of raw materials can fluctuate from time to time which raises your landing cost.

To prevent you from having to change your pricing constantly, you need to set your selling price with a good profit margin. A lot of skincare products on the market are actually priced between five and six times its landing cost giving a profit margin of at least 80 percent. 

This means if your landing cost is $10, then your sale price should be at $50 to have a profit of margin of 80 percent. This gives you a $40 profit per unit.

Final Words

Setting  a reasonable profit margin for your business is important if you want your business to succeed. Otherwise, your brand will just end up burning through your cash.

However, with the right strategies, you can sell your products at the right price not just to cover your landing costs but to also give you enough profit every time.

Anby

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