Hey Seller Community! Hope you're all having a wonderful week โจ
This week's question is...
How do you determine or calculate your pricing? ๐ท
Do they come with preset prices? How often do you adjust them? Can't wait to read your replies!
@QuokkaCoffee Margins on ice cream and other frozen treats are already pretty good as it is. And I spent a lot of time over our closed months buying up all of the product that I could before we opened, since I could see that the prices werenโt going to get better for probably a year. But when we blew through that product, inflation hit me square in the face. The worst part of it for us was the freight costs, especially on our basic soft serve product. Those have gone up over 100%, which is a huge impact given that Iโm limited in where I can source that.
Honestly, if I were going to pass my entire costs on to my customers, I would have had to raise prices by at least 30% and in many cases 50%. Iโm not sure I could have done that. So we decided to share the pain with our guests โ they eat about 60% of the increased costs and we eat the rest. Also, for now, we are not applying our markup rule for the added costs โ we are assuming they will be temporary (ie - this season only) and only adding the extra costs to our selling price โ no profit. For now, it is working, and the customers are by and large none the wiser. But, I have the advantage of not having indoor seating and the massive overhead associated with that seating. So we can do this, for now.
This is the area where I said being in a diverse socio-economic neighborhood is tricky. Many of my customers count not afford the drastic increases Iโd have to make if I passed everything through to them, with overhead. So I try to carefully balance it, praying to whatever gods exist (if any) that this will break sooner rather than later.
Gauges of success? Thatโs easy for me. It is my basic line of frozen treats โ dishes and cones. As long as my CoGS remains relatively consistent (since that line is 75% of my sales), we will survive and even thrive. So far, weโve managed it.
For my shop my lowest margin is around 50% - 64% depending on the item. I also have a storefront, so I have to incorporate expenses of running a store into my prices as well. Yearly I go back and look at my expenses and adjust prices if or as needed.
