How To Price Your Candles
You’ve decided to take the leap and be a candle-maker: congratulations! Welcome to the family! But how should I price my candles?
Now you have two critical questions in front of you:
- How should I price my candles?
- Can I make a profit?
In our previous blog STARTING A CANDLE BUSINESS we discussed that setting the prices for your candles has to do with your costs as well as your target audience. Now time to dig a bit deeper…
DEFINE YOUR PRICE TARGET
For simplicity’s sake, let’s break potential candle buyers into three tiers: low price, mid price, and high price.
The low price tier consists of customers who are looking for a great value candle at a bargain price. If you want your candles to be accessible to mostly everyone, this may be the best fit for your brand!
You’ll want to be especially mindful of your costs so you can ensure you’re making a healthy profit… More on that to come. Based on our market research, candles in the low price tier typically range from $5 to $15 depending on their size. The lowest priced candles are typically also sold in high volume.
Mid price candles still offer an excellent value for their price point, but you will be able to use slightly higher priced components if your target audience is willing to pay a higher price for candles. For example, perhaps you can afford to splurge for that fancy custom label or you will choose to use a natural wax blend instead of the more traditional (and lower costing) paraffin wax.
Mid tier candles are typically priced between $20 to $40 depending on their size.
If you are going to be asking top dollar selling to the luxury market (high price tier), then you had best be using top quality everything – wax, fragrance, vessels, and packaging. Check out LAB & CO for all these items + more!
Top of the line luxury candles can be sold from $50+, all the way up to the most expensive candle in the world which retails for $990! Of course, it’s featuring a wooden wick!
WHO IS YOUR CUSTOMER?
While the tiers defined above are more broad, the point of all of this information is to define which section of the market you’ll want to place yourself in, and make sure your target customer will actually pay the price you will need to charge. Which begs the question, how do you narrow in on who your target customer is?
If you want more information on how to define your target customer, check out our Who Would Want to Buy My Candles? blog. Here we go into all the details on how to determine your target customer.
PRICE YOUR CANDLES
Now, let’s get into the actual pricing component and how it’s calculated AKA how to price your candles…
To simplify the process we prefer to work backwards. Below is an example of how to do that:
How much do you think your customer will pay? Let’s say $45 (retail price).
This means if you’re going to wholesale to stores, the wholesale price would need to be half of that to accommodate for the retailer’s margin. $22.50 (wholesale price)
DEFINE YOUR COSTS
COGS (Cost of Goods Sold): These are the direct costs of the materials and the labor to make the candle. This does not include indirect expenses like rent, electric bill, insurance, etc. This is only the cost of the materials and the labor.
Our experience has shown that you want the COGS to be 1/3 of the wholesale price so in this case that would be $7.50.
Keep in mind this is the goal, maybe the candle actually costs you $12 to make in the beginning, but you know in time as you are buying in higher quantities and your costs are coming down, that your margin will increase and get you down to $7.50.
In the example above, which we do believe to be a very good and simple formula, it would give you the following:
When selling direct to the consumer for the full retail price of $45 and a COGS of $7.50:
- 85% margin
- 500% markup
- $37.50 gross profit
When selling wholesale at $22.50 and a COGS of $7.50:
- 66% margin
- 200% markup
- $15 gross profit
FIND EFFICIENCIES IN YOUR WORK
Wherever you purchase your candle supplies from, be sure to inquire if they offer bulk discounts on any of their components. This will help you to identify if you’ll be able to bring future costs down. If you are shopping at LAB & CO, bulk discounts are offered on waxes, vessels, fragrances and wicks.
Another way you’ll be able to bring your cost of goods sold down over time as you increase quantity is by increasing your manufacturing efficiency. Much of the work in candle making is in the set up, while the actual pouring of your candle may only take a minute or less per candle.
Say it takes you 45 minutes to make 5 candles in the beginning, or 9 minutes per candle broken down.
- 25 minutes to set up your vessels, wax melter, and wicks
- 5 minutes to pour and mix your fragrance
- 5 minutes to pour the candles
- 5 more minutes to clean up
- Additional 5 minutes the next day finishing your candles with a heat gun.
As you produce your candles in higher quantity, some factors in your labor cost may stay close to the same.
Perhaps you are now making 10 candles at a time. Your set up time has increased to 30 minutes, your pouring time has increased to 7 minutes, and your clean up time has remained the same. It still takes you 5 minutes to finish the candles with a heat gun.
Your labor time has now decreased to 4.7 minutes per candle and you have increased your manufacturing efficiency, therefore bringing down your labor “cost” per candle.
HOW TO PRICE YOUR CANDLES OVERVIEW
The above is just a super simple guideline on how to price candles but doesn’t point out several factors that you do need to be aware of or take into consideration:
- Where are you gathering your information as to how much you think your customer will pay? (Again, for more details check out Who Would Want to Buy My Candles?)
- Have you thoroughly researched your competition?
- Are you aware of other candles on the market that are of similar quality, and have you evaluated how your product and pricing is positioned among them?
- Are you a little on the high end of the competition? That is ok, as long as you can justify it. Be sure to know what makes your candles stand out from the crowd so that your customers know why they are paying a bit more for your fabulous candles (read our blog post WHAT MAKES YOUR CANDLES DIFFERENT?)
Remember, it’s not easy to raise your prices once you’ve set them, so set them carefully. One consideration, if you want to test your pricing, is to have “introductory specials” or some sort of special pricing that is for a limited time only.
Don’t run your business in a bubble. Educate yourself on your industry, know your competition, market trends, get involved in industry events or shows, READ as much as you can and work from a place of not just creativity and instinct, as most of us creative types do, but also from knowledge and research.
READ OUR CANDLE BUSINESS SCHOOL SERIES:
- Help, I Need a Logo!
- Choosing a Brand Name
- What is the Best Mode of Distribution for my Candles?
- Budget and Small Business Stuff
- How To Sell Scented Product Online