How to price custom shirts for maximum profit

Setting up an online t-shirt shop is a fun and lucrative way to turn your creativity into income. But many sellers discover that t-shirt pricing is a far more complex process than they'd imagined.

On one hand, you'll need to charge prices that cover your upfront costs to keep your business afloat. On the other hand, it's important to sell your shirts at a reasonable rate to remain competitive.

In this article, we’ll explain how to price custom shirts to maximize your profit margins while remaining competitive. From understanding material and design costs to selecting the right pricing strategies and optimizing with Gelato's tools, we’ll cover all the critical aspects to help you find the perfect price for your custom t-shirts.

• Understand all costs of producing custom t-shirts to set prices that cover expenses and maximize profits.

• Establish a target profit margin to guide pricing decisions and achieve financial goals while staying competitive.

• Use the retail price formula as a baseline, but adjust based on market conditions and customer demand.

• Leverage Gelato's Price Navigator and Retail Insights to choose the right pricing strategy, optimize profits, and attract customers.

Practical apparel prices can be a game-changer for your business. By following a step-by-step approach, you can ensure maximum profitability while staying competitive. From understanding the costs to choosing the right pricing strategy, let's explore how you can optimize your pricing for success when selling t-shirts online.

1. Understand your total costs

Before setting your custom t-shirt pricing, it's crucial to understand all the costs involved, including everything from design and production to shipping and marketing. Knowing your total costs ensures you can set a price that covers expenses and maximizes profit. Let's detail each of these cost factors for selling t-shirts.

Design costs

If you create your own t-shirt designs, do you have to pay subscription costs for software like Adobe Photoshop? Or do you use free software like Photoshop Express to create your designs?

If you're better at coming up with great ideas than actually turning them into designs, then you might even consider hiring a professional freelance designer to help bring them to life. No matter how you create the designs you plan to print on your t-shirts, be sure to calculate any monthly costs into your overhead!

T-shirt production costs

Production costs include the cost of your t-shirts themselves and any materials or supplies you use to print your designs on them. For example, some sellers invest in the materials needed to use heat transfers or screen printing to customize their t-shirts.

Others utilize a print on demand partner like Gelato, which takes care of the order production and fulfillment process. Each time you sell a product, we'll supply the shirt, print the design on it, and deliver it right to your customer.

Print on demand is a quick way to produce more custom products without actually having to deal with the production process yourself. You'll also enjoy the benefits of never having to purchase any inventory until you've already made a sale.

Platform fees

To start a business on the web, you'll need an online storefront where you can sell your products to customers. Make sure you factor in the transaction fees the marketplace takes out of each sale.

If you choose to go with an ecommerce platform like Shopify, then be sure to calculate your monthly subscription fees into your overhead costs. Unfortunately, when it comes to which option is the best, there's no one-size-fits-all answer because every business is different.

If you go with a transaction-fee-based site like Etsy, just be sure to monitor your sales each month to determine the total cost coming out of your profits. As you scale your business, you may get to a point where you discover it's cheaper to go with a flat-fee-based ecommerce solution.

Shipping costs

Shipping fees are a necessary nuisance when it comes to running your own online business and can generally be approached in one of two ways. The first is to simply pass along the shipping price to your customers by taking it onto the price of each sale.

The second is to work shipping fees into the t-shirt cost itself and then offer "free shipping." In the era of Amazon Prime, some customers may be averse to covering their own shipping, so working it into the total cost can be a nice way to avoid abandoned carts without affecting your profit margins.

If you choose to use Gelato as your print on demand supplier, it's worth checking out our subscription options once you reach a certain sales quantity. If you choose to upgrade, you can enjoy special discounts on shipping rates.

Taxes

Be sure to calculate any relevant taxes into your pricing, such as the sales tax on each order and any income tax you may owe on your business. You'll want to consider these when determining the total cost of your products so that they don't eat away at your profit margins.

Marketing costs

Finally, the cost of marketing can be an important consideration in t-shirt pricing as it can highly affect your sales quantity. Many sellers use paid ads or influencer marketing to help promote their business, each of which can cost extra cash.

2. Establish your target profit margin

Before setting a price for your custom shirts, determine your target profit margin percentage. This number represents the revenue percentage remaining after all production and selling online costs are covered. Establishing this benchmark will help guide your pricing decisions and ensure you meet your financial goals while staying competitive.

For example, say you want to make a 30% profit on a shirt that costs $15 to produce. If you want to work out the cost yourself, you could plug your numbers into the following formula:

Overhead costs ÷ (100 - return rate) x 100 = t-shirt price

Or you can use Gelato’s profit calculator to project your potential earnings with your print on demand business.

3. Use the retail price formula

Setting the correct retail price can be simplified using the retail price formula. Start by calculating the total cost to produce one shirt, including materials, labor, and overheads.

Once you've got this figure, apply the retail formula: 

Retail Price = Wholesale Price x 2

The wholesale price itself should be about double your production cost. This formula helps ensure you cover expenses and achieve a reasonable profit margin.

However, never rely solely on this formula. Use it as a baseline and adjust according to market conditions, customer demand, and your product's unique aspects. This approach helps you stay competitive while maximizing profitability.

4. Analyze your target market and competition

Understanding your target market is pivotal. Start by defining your ideal customer - age, interests, and spending habits. Conduct market research to gauge their willingness to pay for custom shirts. Use surveys, focus groups, and social media analytics to gather data. This information will help align your pricing with what your customers are willing and able to spend. 

Equally important is analyzing your competition. Identify your key competitors and closely examine their pricing strategies. Are they using discounts, bundles, or premium pricing? Note their strengths and weaknesses. This analysis can reveal gaps in the market that your brand can exploit to set a competitive but profitable price point.

5. Consider the uniqueness of your designs

The more unique your designs are, and the more they resonate with your target audience, the more you'll be able to charge for them. Buyers tend to be willing to pay more for a truly unique shirt with a design they haven't seen or can't find anywhere else.

While it's still good practice to keep your shirt pricing realistic, creating a popular shirt that's truly original can justify charging a slightly higher rate. It's also a great way to ensure that your business stands out from competitors.

6. Choose the right pricing strategy

There are several different ways to go about shirt pricing. The right method for you will depend on the details of your brand. You may even choose to utilize different t-shirt pricing strategies at different stages of your business development.

Competitive pricing

Competitive pricing, or penetration pricing, is the art of offering your t-shirt for a lower cost than your competitors. While this can be a great way to help establish your business, it may initially result in less profit.

If you choose to go this route, avoid the temptation to offer lower-quality merchandise to make up the profit margin difference. The goal is to attract a solid customer base that can help you scale your business long-term, so make sure you give each buyer plenty of reasons to make more purchases in the future.

Cost-plus pricing

Cost-plus pricing is a method that allows you to determine the price of an item by adding a set percentage to your production costs. For example, you might decide to mark up every product in your online store at 30% of the total cost it took to produce.

Dynamic pricing

Dynamic pricing is a bit more complicated but involves adjusting your shirt pricing based on demand. For example, if a seller discovered that one of their shirts was particularly popular, they might slowly increase its price.

Dynamic pricing is one form of value-based pricing, which involves pricing your shirts based on your customer's perceived value of each. While value-based pricing can be a solid approach, it requires more extensive, ongoing research than other methods.

Bundle pricing

Bundling is a form of pricing that offers buyers a reduced cost when they purchase two or more items together. It's sort of like bulk pricing but on a smaller scale.

Instead of offering customers the chance to enjoy a bulk discount on major orders, you might consider running a buy one, get one 50% off sale. Or you could include a free fourth t-shirt with the purchase of at least three others.

Anchor pricing

Anchor pricing involves placing a higher-priced item next to your main products to make the latter seem more affordable. This method leverages consumer perception, encouraging them to choose the mid-range option that offers the best value. For instance, if you display a premium custom shirt at $50 alongside your standard $30 shirts, customers may see the $30 option as a bargain. 

This strategy highlights the value of your regular offerings, potentially increasing sales and driving higher profit margins. Use it wisely by ensuring your higher-priced items are appealing and justifiably expensive.

7. Use pricing tools and calculators

Leverage advanced pricing tools and calculators to streamline your pricing process. These tools, like Gelato's Price Navigator, can help you accurately account for all expenses, from material costs to shipping fees, ensuring that your prices are competitive and profitable. By using such tools, you can save time, reduce errors, and make data-driven decisions. 

Pricing calculators allow you to experiment with different pricing strategies. Whether considering cost-plus or dynamic pricing, these tools can simulate various scenarios, helping you find the optimal price point for your custom shirts. Doing this boosts your profit margins and enhances your competitiveness.

8. Offer discounts and promotions

Who doesn't love a good sale? Offering discounts and promotions is a great way to build your client base and boost your sales quantity.

Consider running a BOGO half-off sale or offering free shipping for a limited time. If you run a newsletter or email list, you can also send out coupon codes that offer a certain percentage off of the total cost of each subscriber's next order.

9. Test and monitor your pricing

T-shirt pricing isn't an exact science and sometimes comes down to the interests and values of your target audience. For example, some buyers may be willing to pay more for performance athletic t-shirts or shirts made from organic materials.

Other shoppers might prefer quantity over quality and prefer t-shirts that come with a cheaper price tag. Experiment with different pricing tips and strategies, discounts, and promos over time so that you can monitor which ones work the best

Whether you use a t-shirt pricing calculator or simply add your desired profit to the production cost, finding the ideal price range for your customers is vital. Experiment often to see what works best for your shop. 

Gelato's business model offers unique features like Price Navigator and Retail Insights to help you calculate the right price for your custom shirts. These tools allow you to analyze market opportunities, review local competitors, and understand production costs. 

Print on demand services like Gelato simplifies t-shirt pricing by providing essential tools and relieving you from purchasing supplies or printing equipment. Sign up for Gelato today to start selling high-quality custom shirts!

What is a good price for a custom t-shirt?

Determining a reasonable price when you create custom t-shirts involves considering material quality, production costs, and market trends. An average custom t-shirt typically falls within the $16-$27 price range. If you're offering higher-quality materials or unique designs, you can price them higher. Use tools like Gelato's Price Navigator to fine-tune your pricing strategy.

How much profit should I make per shirt?

Your profit margin involves carefully considering all costs—design, production, marketing, and overhead. A common goal is to achieve a profit margin of at least 50-60%, meaning if your total cost per shirt is $10, you should aim to sell t-shirts for $20-$25. Adjust based on quality, market demand, and competition analysis to find the sweet spot that maximizes your profit when you start selling online.

Is it profitable to make custom shirts?

Custom shirts can be highly profitable when priced correctly. Your profit hinges on production costs, design complexity, and market demand. Pricing tools can help you find the optimal price point. Consider direct-to-garment printing for cost efficiency and personalization. You can scale profitably in this competitive market by understanding your costs and audience.

How much should I pay an artist for t-shirt design?

Paying an artist for a t-shirt design can vary. Typically, rates range from $50 to $500 per design, depending on the designer's experience and the project's complexity.

What is the average markup on a shirt?

The average markup on a custom shirt varies but typically ranges from 30% to 50%. This margin ensures you cover all costs, including design, production, and marketing, while making a profit. For instance, if a shirt costs $10 to produce, you might sell it for $15 to $20, maintaining competitive yet profitable pricing.