June 01, 2007

Setting Your Candles' Sale Price

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 product?

  • retail store
  • craft shows
  • consignment store
  • wholesale
  • other

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 to achieve.

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.

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CHANDLER'S CORNER

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 capture. 
Depending on the store it might be teenagers, might be housewives. 

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.



June 2007

Featured Project:
Summer Sand Candles

With summer in full swing we thought it would be appropriate to feature a project that allows you to use something that many will be spending a great deal of time, and that is sand.  Sand candles have been around for a very long time and can make a very memorable gift from your summer vacation.

Materials

Tub/ Bucket
Water
Glass or solid object
Wax (141 Melt point)
Wick  
Dyes  (Color Blocks)

Fill the tub / bucket up with sand. Add water (you will have to experiment with the amount of water since sand texture varies) and try to pack the sand as tight as possible. The tighter it packs and the less water you use, the more consistent the outside shell of the candle will be.

Once the sand is packed tightly, take the cup or object and form a “cavity” in the sand. Once the cavity is formed, take your wax and pour it into the wax at around 195-205.  The wax can already be colored or you can now take color blocks and swirl them on top. 

Once the wax gets a film on top, place the wick assembly into the wax.  As the wax gets a little harder you may want to add shells and other non-combustible decorations.

 

 

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