How to price your products so your shop makes money

Pricing feels like guesswork for many small shops: look at what others charge, go a little lower, and hope it works. The problem is that a price set without knowing your real cost can look like it is selling well while quietly losing money on every order.

Step 1: know what a sale really costs you

The cost of a product is more than what you paid your supplier. For each sale, add up everything it takes to get that product to the customer.

• What you paid for the product, including freight to bring it to you.
• Packaging: the bag, box, tape and label.
• Delivery, if you pay for it or part of it.
• Payment costs, if your payment method charges a fee.
• A share for returns and damaged stock, because some always happen.

Write these down for your top products. The total is often a surprise, especially once delivery and returns are counted.

Step 2: decide the margin you need

Your margin is what is left after the real cost, and it has to pay for everything else: rent, salaries, electricity, your own time, and some profit. Work out roughly what those come to in a month and how many sales you make, and you will see what each sale needs to contribute.

A worked example

Say a shirt costs you Rs 900 from the supplier, Rs 50 in packaging and Rs 200 towards delivery: Rs 1,150 in all. Priced at Rs 1,500, it leaves Rs 350 towards your running costs and profit. Priced at Rs 1,300 to beat a competitor, it leaves Rs 150, less than half, and you would need more than twice as many sales to earn the same.

Step 3: check the market, last

Now look at what similar products sell for. If your price is well above the market, ask whether your product is genuinely better and whether your photos and description show it. If it is far below, you may be leaving money on the table.

Bundles and packs, without losing money

Selling items together can raise the size of each order. A bundle of a shirt and trousers at a small discount, or a pack of three at a better price per piece, encourages customers to buy more. Check the bundle still makes money after the discount, using the same real-cost sum as above.

On Biizay, a bundle takes stock from each item inside it, and a pack such as a box of 50 counts as 50 pieces, so your stock stays right however customers buy. See how bundles and packs work.

Keep costs recorded, so profit stays true

Prices from suppliers change. If you only update the cost in your head, your sense of which products are profitable drifts. Record the cost of each product, and when you restock at a new price, update it. A system that keeps each sale's cost as it was on the day of the sale can show you real profit over time, not just revenue.

Review prices regularly

1. 1Every few months, recheck the real cost of your top 20 products.
2. 2Raise prices on products that sell out fast and still make little.
3. 3Look hard at products that rarely sell and tie up money in stock.

In short

Know the real cost, decide the margin you need, then check the market. If you are setting up a store now, our guide to starting an online store in Pakistan puts pricing in context with everything else, and our point of sale guide covers reports that show profit, not just sales.