Raising prices feels risky. Leaving them where they are is riskier. When to raise, how much, what to say to customers and stockists, and what actually happens.
Raising your prices feels like the riskiest thing you can do to a product business. It is almost always less risky than leaving them where they are.
Here is the short answer. Raise your prices when your landed cost has moved, do it in one clean step, and say very little about it. Most of your customers will not notice. The ones who do will mostly stay.
I have done this badly and I have done it well. The badly version cost me a year.
When should you raise your prices?
When the numbers underneath the price have changed, and you can prove it to yourself.
Check your landed cost every time you reorder. Not once a year. Every run. If your cost has moved and your price has not, you are quietly paying the difference out of your own margin.
If you have never built that number line by line, how to calculate landed cost per unit over on Source Haus walks through it.
Four triggers worth acting on.
- Your landed cost has gone up. Freight, currency, materials, or the factory repricing you.
- You are turning wholesale away because there is no room in your retail price.
- You are the cheapest in your category and you never chose to be.
- You have genuinely added something. Better materials, better packaging, a warranty you actually honour.
There is a fifth trigger nobody puts on a list. You are working extremely hard and making almost nothing. That is a legitimate reason to raise your prices. It is just not a reason you explain to customers.
How do you know if you are underpriced?
Four checks. None of them involve asking your customers what they would pay.
Your gross margin is under 60 percent on direct sales.
Retail price minus landed cost, as a percentage of the price. Under 60 percent and there is not enough left to cover ads, returns, breakages, a 3PL and paying yourself.
Nobody ever hesitates.
If no customer has ever flinched at your price and nothing ever sits in a cart overnight, you have left money on the table. A little hesitation is the sign you have priced it right.
You cannot afford to sell wholesale.
If giving a stockist 50 percent off would put you underwater, the problem is your retail price. Not your wholesale terms.
You are the cheapest thing your customer compares you to.
Go and look at the three products she is choosing between. If you are the cheapest and you did not set out to be, that is an accident, not positioning.
Being the cheapest is a real strategy, but it works at volume. Most small product businesses do not have volume, and the cash flow pressure of running thin is brutal.
How much should you raise your prices by?
Enough to fix the problem once, rather than three times in a year.
The maths catches people out, so here it is plainly.
Say your landed cost is $10 and you sell at $40. That is 75 percent gross margin. Freight and currency push your landed cost to $12. Hold your price and your margin drops to 70 percent. To get back to where you started, you need to sell at $48.
A $2 increase in cost needs an $8 increase in price. Margin is a percentage, and percentages multiply as they move up the chain. Founders almost always under-raise, because they add the $2 and stop.
Those numbers are illustrative. Run them on your own product before you decide anything.
On size, small and frequent beats rare and large. Five to ten percent at a reorder is close to invisible. Thirty percent in one jump gets you emails, screenshots and a week of second-guessing yourself.
If you are a long way underpriced and one step cannot fix it, do it in two, six months apart. Do not do it in five.
Do you have to tell customers about a price increase?
If you sell direct to consumers, usually no.
Nobody is keeping a record of what your candle cost last March. Change the number on the site and carry on. Announcing a rise to people who were never going to notice is how you turn a non-event into an event.
You do announce it when the old price was effectively a promise. That means:
- Subscription customers
- Wholesale and stockist accounts
- Anyone on a standing or repeat order
- Anyone holding a quote you have given them
One timing rule. Do not raise your price in the same week you are running a campaign, a launch or a gifting push. Let the new price sit there and be boring for a few weeks first.
What do you say when you announce a price rise?
Very little, in this order.
- 1Tell them it is happening and give the date.
- 2Give the reason in one sentence.
- 3Offer a window at the old price, if you can afford to.
- 4Stop writing.
No apology. An apology tells your customer you think the new price is unfair, and then you are arguing against yourself before they have even replied.
No essay about global supply chains either. If your explanation runs to four paragraphs, the real reason is that you are nervous.
"Our prices go up on 1 November. Our costs have risen and we have held this price for two years. Anything ordered before then is at the current price." That is the whole email.
The mistake I made at Incy Interiors
I priced our first cots off the factory quote instead of the landed cost. Cots are big. Sea freight on something that size is not a rounding error, and I had not costed it properly per unit.
We launched, sold well, and I felt very clever for about eight months.
Then the retailers started calling, which was exactly what I wanted. Getting into stores is what took Incy from a small brand to a business selling in nine countries. But a retailer needs to buy at roughly half your retail price, because they have their own margin to make. When I did the maths, there was nothing there.
So I raised prices on customers who had bought from me weeks earlier.
The increase itself was not the hard part. The hard part was that I could not explain it without admitting the first number had been wrong. Sales did not collapse. Almost nobody left. What it cost me was a year of awkward conversations and a lot of confidence walking into every stockist meeting.
Building the wholesale layer in from the start would have prevented all of it. That is the whole point of pricing a product so wholesale does not kill you.
How do you raise prices with stockists?
Differently, and with notice.
- Give 60 days notice in writing.
- Honour any purchase order already placed.
- Send a dated price list as a proper document, not a line in an email.
- Tell them the new recommended retail price, not only your new wholesale price.
Your stockist has already built next season's margin on your old number. Some of them have printed a catalogue with it. The notice is what protects the relationship, and the relationship is worth far more than the increase.
Expect one or two to push back. Hold. A stockist who walks over a fair increase was already close to dropping you, and my guide on getting your product into stockists covers how those relationships are meant to work.
What if you cannot raise your price?
Then the price was never the problem. The cost was.
If the market genuinely will not carry a higher number, go back down the chain instead.
- Ask your factory for a cost breakdown and work the lines that actually move.
- Change the spec. A different material or a simpler finish the customer cannot see.
- Change the freight profile. Flat pack it, nest it, fit more into a carton.
- Change the order quantity, if your cash allows it.
The execution detail on that first one sits on Source Haus, in how to get a better price from your factory.
Do that work before you touch your retail price. It is slower and it is better.
What actually happens when you raise prices?
Less than you are imagining.
- A small number of customers notice. A smaller number say anything.
- Units can dip for a few weeks. Revenue usually holds, and often rises.
- Your best customers are rarely your most price sensitive ones.
The person who leaves over five percent was never going to become a repeat customer anyway.
I sell jewellery now at $499 for an enamel ring and $1,599 for a statement necklace. The slowest piece in that collection is not the most expensive one. It is the piece I was most certain about. Price is almost never the reason something does not sell.
That is a different job, and I wrote it up in what to do with stock that isn't selling.
The part you will actually feel is your own nerve in the fortnight before you do it. That is normal. It passes around day three.
The takeaway
Check your landed cost at every reorder. Raise when the cost moves, not when you finally cannot stand it any more.
Raise by enough to hold your margin, which is more than the cost increase. Do it in one clean step, keep it small, and do it more often.
Say nothing to your direct customers. Give your stockists 60 days.
And do not apologise. You are running a business that has to make money, and a price that does not is not a kindness to anyone.
Working out what your product really costs, what it should sell for and how to protect your margin is exactly what we work through inside Start Here.
Build the asset. Don't just be the asset.
Frequently asked questions
How often should you raise your prices in a product business?
Review your landed cost at every reorder and raise whenever it has moved more than a few percent. For most product businesses that works out to once a year or once every second run. Small, frequent increases of five to ten percent are far easier for customers to absorb than one large correction.
Do you need to tell customers you are raising prices?
Not if you sell direct to consumers. Change the price and carry on. You do need to tell subscription customers, wholesale stockists, and anyone holding a quote or a standing order. Give stockists 60 days notice in writing.
How much should you raise your price if your costs go up?
More than the cost increase. If your landed cost rises from $10 to $12 on a $40 product, you need to sell at $48 to hold the same gross margin. Adding only the $2 leaves you worse off than you were before.
Kristy Withers
Product business strategist & sourcing specialist
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