Setting Your Candles' Sale Price
In our last issue we helped by identifying all of the potential cost associated in manufacturing
a candle. Now that you have accomplished the first piece of the puzzle, it is time to determine
what type of preliminary price you wish to set for your product.
You would think this should be an easy formula, but with many factors to consider it is
actually a very difficult process. The purpose of this article is to help identify the general
price range and which markets to consider. No doubt, there are always exceptions and unique
circumstances that will have an impact on these guidelines.
The first question that needs to be answered is: How will you be selling your
- retail store
- craft shows
- consignment store
Each of these distribution channels dictates a generally accepted margin level.
A general guide to follow is:
The closer you are to selling the consumer, the higher the margin you should attempt
The closer you are to selling the consumer, the higher the margin you should attempt to achieve.
There are several reasons this logic prevails. The first reason is that you are taking
most of the supply chain cost out of the equation, which allows you to make that money.
The second reason is that you will have to handle more single transactions, which drives
up your cost and time involved.
Some of these costs were identified in the last issue and include advertising, promotions
and explaining the product and unfortunately returns. In most instances, in order to
make it work, you need a minimum of a 40 percent margin with a maximum, depending on competition,
up to possibly 60 percent.
Again, this is ideal but subject to many other factors. One that comes to mind is if you
use candles to get people to your store or booth, and they purchase candle holders or accessories,
maybe that percentage can be smaller.
The next selling venue to consider would be wholesale. In this selling mode, you produce
the candles and sell to another entity that will market the product to the consumer. This
allows you to focus on producing a good product and building your brand image and product
development. The retailer/website then will sell your product.
Trade shows, trade publications and mailers to the potential customers is a great way
to introduce your product. Starting with your local stores is always a great way to get
started. You can deliver the product, thus saving shipping cost for the retailer, even
manage the inventory and consider some joint advertising. The expected margin selling
in this area will truly depend on how you wish to run your business. If you have low
overhead and wish to try and get new customers quickly with price, maybe you only have
a 33 percent. This is very low and you must really have a control on your cost to do
this margin level. However, it is important not to sell them too low because of the many
unknowns, i.e. production errors, sudden price increases and lost accounts.
The last selling venue is what we call a hybrid. There are several selling categories
I would include in this one, since by definition they may not be a retailer or a distributor.
The first one is fundraising, which is a very successful venue for candles. This would be
where you produce the candles and have an organization selling your product to help raise
funds for their purpose. Unlike wholesale, after the consumer purchases and likes your product,
you can start to sell direct to the consumers that purchased candles as part of the fundraiser.
Maybe even offer the organization a small commission on repeat orders.
Most times a 40-60 percent margin gives room for both the candle manufacturer and the
group to make money at their event.
If you recall, earlier in this article we used the term preliminary cost because from
time to time you may have to move off that pricing. If a large enough order comes in, you
might want to give further discounts.
Without doubt, one of the most important things to consider when developing your cost
is what the competition is doing. The important distinction in this process is to determine
what truly constitutes a competitor. In most instances, the candles being sold in grocery
stores are not always a competitor because the candle could be of a different quality.
The brand name candle company may not be a competitor, because they have the ability
to charge more for the name. You need to determine your target market and review the
pricing of the candles being sold to those markets.
Over the years, we have identified that candle making has some unique words that
many in the industry take for granted like mottling, pre-wick assemblies and other. Selling
product to retailers, consumers and other outlets also has their own terminology. Here
are some of the words you may see or hear.
ROI (Return on Investment) - This is the percentage of return that you
get from investing in advertising, equipment or anywhere you invest funds to help your
business grow. This is a common term used these days when referring to paid click ads
on the internet.
BOGO (Buy One Get One Free) - This is very common to drive sales for
a particular product.
Planogram - A layout of the products that illustrates how and where retail
products should be displayed, which is usually on a store shelf.
Margin - This is the percentage between what it costs to produce and
sell your candle.
Target Market - The defined market the retailer or you are trying to
Loss Leader - When the retailer will sell an item below cost to drive traffic
to their store in hopes that the higher margin items will get sold.
Depending on the store it might be teenagers, might be housewives.