Pricing can mean the difference between success and failure in your tee shirt business. So many people I talk to just randomly pick a price without having any idea why. Deciding how to price tee shirts can confound even experienced sellers.
Unfortunately, when you’re new, you don’t really have a choice. If you don’t know what it costs you to sell a tee shirt then you basically need to select a price and start gathering data. Average price for a tee shirt is about $15-$40 so your price should fall somewhere in that range.
What factors go into pricing a tee shirt?
There is more to calculating time than just the time it takes you to create the design. You also need to consider the time it takes to upload the design, create mock-ups, write titles and descriptions etc. The good news is that you can divide this over the total number of sales. So there’s a high cost to create a new design but that cost per unit decreases with each sale.
(Total Time)/(Total Number of Sales) * Hourly Rate = Cost Per Unit
So if I expect a new design to sell 20 copies in the next year, it takes me 30 minutes to create and I pay myself or a designer $25/hour my cost in time comes out to:
.5 Hours / 20 Units * $25 / Hour = .05 * $25 = $1.25/Unit.
Sell more units and the cost decreases, sell less and the cost increases.
You also need to consider any overhead paid out to run your business. Do you pay for a design or software subscription service? Maybe you use Merch Informer. Those costs need to be considered when you price your designs. Make sure you’re not relying on volume to turn a profit. You can’t control how many units you’ll sell, but you can determine your prices and make sure yours covers all your costs. You can add up your total monthly expenses, divide by the number of sales you made and attribute some of that cost to each design. As you sell more units your overhead cost per unit will decrease. For our example let’s assume you’re paying $100/Month for tools or vector packs, fonts etc.
$100 Month in software / 300 Units sold monthly = .33/ Unit.
3. Marketing Cost
As the marketplaces have become more saturated, advertising has become a necessary expense. Unfortunately, you won’t know how well specific designs will do until you’ve gathered a bunch of data. Amazon advertising breaks down your ACOS or average cost of a sale.
That’s great if you’ve sold a ton and spent a lot on advertising but if not, just use your total monthly ad spend and divide it by the number of units sold like we did for overhead. Let’s assume $25/month in Pay per click ads. Obviously you could go nuts with ads but I’d recommend you start by using it on proven sellers. Set an ad budget and stick to it until you have enough data to know what’s working!
$25/300 Units Sold = .08 / Unit
4. Base Price of Item
The base price of your item from your production partner (whoever is making the T’s for you) needs to be factored in. Most items cost between $8 and $11 plus shipping of $4. Let’s just assume $10 per shirt for our example.
Base price $10.
5. Taxes and Fees
Selling fees, payment processor fees and taxes may also need to be considered. Average for my Etsy sales is about $2 in fees. I’ve never sold anything locally so I have not paid sales taxes and I don’t use my own website at this time, so payment processor fees are not included either. Just keep them in mind if you expand your business.
Average platform fee $2
I’m guessing that’s a lot higher than you expected. Priced at 19.99 we only earn a 13% profit margin. And that’s if I make my sales target of 300 shirts sold in the month.
Keep in mind that I’m paying myself $25/hour in this example. If you expect to ever scale your business, then that $25 will most likely not go to you. It will go to a designer or design service. But you, as the business owner at that point, will only be making 13% profit in your business.
To me, that isn’t nearly enough and I’m also not really interested in just replacing my job. In this example I’d be pricing my shirts at 24.99 and earning a profit margin of 41%. That’s a number you can build a business on.
Pricing Tee Shirt For Your Niche
The target market of your designs or brand is also a consideration. Price is a way that we communicate value. So be aware of what message you’re sending.
If your brand is positioned as a premium brand or your target market expects to pay a premium price then pricing too low will also cost you sales.
The opposite is also true, if you’re designing tacky novelty tees (which is totally legitimate) then pricing too high will cost you the sale.
Is your shirt being purchased because it’s a funny gift to give someone as a gag? Or is it being purchased because your target customer believes it is a premium product that tells other something about who they are and what they value.
Know your numbers! And be deliberate when you decide how to price tee shirts for your business.