What to Consider When Pricing Online vs. In Store

What to Consider When Pricing Online vs. In Store
There are a lot of factors to consider when starting your business. Should you sell your goods or services online or in store? Take into account all of the costs that could be incurred, ultimately impacting your profit margin when pricing goods.
by Deborah Findling Jan 22, 2021 — 3 min read
What to Consider When Pricing Online vs. In Store

There are a lot of factors to consider when starting your business. Should you sell your goods or services online or in store? What are some of the costs associated with either option? As you price your goods or services for sale, it’s important to take into account all of the costs that could be incurred, ultimately impacting your profit margin.

For example, let’s say a candlemaker sells candles for $10 per unit. The candle itself costs $8 to make and each jar costs $2. This means without considering any other expense, this seller will make no profit on each good sold.

Here are some things to consider before pricing online or in store.

What is a profit margin?

When it comes to business, here are three types of profit margins to consider when pricing your goods or services:

 

 

Pricing online

There are some costs to consider when optimising pricing for online sales. With no brick-and-mortar location, there are other costs a business can incur. Whether pricing for online or in store, keep in mind these costs when you’re discounting any products or services.

Pricing in store

There are pros and cons to both online and in-store sales. Here are some costs you may incur if you operate a brick-and-mortar business.

 

Remember our candle maker? Perhaps they’ve decided to sell their candles for $15 since they found a way to source bulk jars and wax, bringing the cost to $1 a jar and $5 a candle. With the total cost of goods down to $6 a candle, they now have a $9 gross profit.

Although our seller is fictional, keeping pricing strategies in mind can help real business owners like you plan ahead and calculate how much the costs will factor into profit margins. There’s no right or wrong answer when it comes to pricing, but as your business grows, calculating costs and profits can help you try new and more complex pricing strategies like bundling or pricing goods competitively without losing money.

This article is for informational purposes only and does not constitute professional advice. For specific advice applicable to your business, please contact a professional.

Deborah Findling
Deborah Findling is an editor at Square, where she writes about investment, finance, accounting and other existing and emerging payment methods and technologies.

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