How Under-pricing Can Actually HURT Your Leather Business?
Have you ever been walking down the street, you pass a store window that catches your eye and decide to go in and have a closer look?
You’re browsing and looking at the items that the store carries. You’re looking at prices and you’re shocked and confused at first because the prices are way lower than you expected.
And then you switch from being confused to being turned off because if these items are priced so low, then there must be something wrong with them them, right?
You start to wonder if the leather or hardware is low quality or worse yet, if the item was mass produced in a factory!
Even if you can’t really put your finger on it, something feels off with that price, and it makes you not buy.
So why is that? Why does that happen?
Here are 3 ways under-pricing your leathergoods can actually hurt your business.
1 | WHEN YOU UNDER-PRICE, YOU SEND THE WRONG MESSAGE TO CUSTOMERS
Pricing your leathergoods too low because you don’t think people will buy it for a higher price, actually sends a message to potential customers that your products aren’t worth purchasing.
Often times a low price signals to a buyer that the value of the product is low. When comparing two similar items and debating which to buy, many customers will actually choose the higher priced item because they think that the value of the higher priced product is higher and that the lower priced item is cheap or has a lower value.
So if the actual value of your product is higher then what your pricetag is, you could be sending the wrong message (cheap product, cheaply made, using cheap materials) to customers.
This is bad for business.
2 | YOU ATTRACT THE WRONG CUSTOMER BASE WITH LOW PRICES
Another common mistake is to price your product low right now and then try to raise the price later it on.
This thinking becomes a real challenge because the customers that you’re attracting now with that low price point are not going to be the same customers that are going to purchase your items at a higher price point later on.
So essentially, you’re building a following and a targeted customer base based on the short term goal (selling cheap products) and not the long term goal which is to increase the price your product to the actual value later on.
You might as well start to attract and build the right customer base now, from the very beginning.
3 | LOW PRICES DO NOT ALLOW YOU TO MAKE A PROFIT
When you sell a handbag that you spent 10 hrs making for $100, you’re not really running a sustainable business.
You’re not even breaking even when you consider the labor costs involved let alone the material costs and overhead. When you don’t take into consideration the business as a whole then chances are, your business is not going to be sustainable.
And you might be selling-out of those $100 handbags but you’re not making any profit on them that can be invested back into your business so you can grow and make a living.
Instead, your business is really just an expensive hobby.
HOW TO PRICE YOUR PRODUCTS FOR WHAT THEY'RE WORTH
So now you know why it’s important to have your leathergoods priced properly, lets talk about how to price your products for what they’re worth.
Here are a few key tips to keep in mind when pricing your leathergoods…
Send the right message to customers about your product with your pricetag. Low price is more likely to attract bargain shoppers. Price your products for the actual value. Use real materials and labor costs and take into consideration what kind of business it is that you’re trying to build and for what kind of customer.
Start attracting and building the right customer base upfront instead of trying to build just any customer base and the wrong customer base that is attracted to a low pricetag. When you finally do decide to raise you prices to the actual value of your products, you’re going to have to start all over again building that customer base that is attracted to a higher priced, higher value product. Save time and start attracting the audience now.
And finally pay attention to your profits. You need profits in your business in order to be building and growing your business so you can make an actual income from your leather business. So many small business owners wait and think about this later. They think, let me just try and get some sales. But I think your profits should drive your business decisions always. This is how you build a business that lasts and one where you actually get paid.
Pricing is just one of the major components of building a sustainable leathergoods business but you want to make sure you have this piece right in your leather business from the very beginning.
Are you under-pricing your leathergoods?
Do you have a low price on your leathergoods because you think it will attract more customers?
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