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Black Friday pricing strategies for small fashion businesses

Pricing is one of the most important aspects of any fashion business, and has a higher impact on improving profits. A pricing strategy is the method of pricing a business uses to determine how much to sell its goods for. Whether you're starting a business or growing an existing one, carefully selecting the right pricing strategy requires a deep understanding of your product, your market and your customers.

It is important to create an amazing Black Friday shopping experience, from marketing and inventory to an assertive pricing strategy focused on limited-time offers that catch the consumer’s attention but is also practicable for your business. Your goal cannot be just selling as many items as you desire – you need to develop a strategy that looks at customer retention, provides efficient customer service (even if you’re the one and only person responsible for that area) and is ready to carry out exchanges and returns if necessary.

A successful sale isn't just about attracting customers with a compelling offer – you need to ensure that it remains profitable for your business. And to truly increase sales, small fashion businesses need to be very strategic in how they offer discounts and stand out from the crowd.

Different ways to price your products

Cost plus pricing is the simplest method of determining price, and comprises the basic idea behind doing business: you produce an item, sell it for more than you spent making it (because you’ve added value by providing the product), and then keep the difference. In practice, a lot of companies calculate their cost of production, determine their desired profit margin by pulling a number, then put the two numbers together. This method involves very little market research and doesn't take into consideration consumer demands and competitor strategies.

A value-based pricing strategy works to determine a target customer’s true willingness to pay for a particular product by utilizing customer data. Most common pricing strategies and methodologies forget about the customer, instead focusing on internal reasons and/or competitive metrics to justify prices. Yet customers don’t care how much something costs you or your competitors to make, but about how much value they’re receiving at a particular price. By maintaining this customer focus, value-based pricing provides real data, helps you develop higher quality products and even improves customer loyalty. Simply put, you have the greatest amount of data to make an informed decision about your profit-maximizing price.

Markup versus markdown

For a small fashion entrepreneur, establishing markup is one of the most important parts of pricing strategy. Markups must cover all anticipated costs and reductions, such as markdowns and customer discounts, and still provide a good profit margin.

The markup formula is as follows: markup = 100 x (profit / total cost)

Keep in mind your profit margin while developing your Black Friday discounts, so you can reduce loss while maximizing your profit!

Marking down is discounting your selling price. Slow-moving stock takes up valuable space in your store or warehouse, which means there’s less room for other products that may be in higher demand. Marking down your slow-moving goods or deadstock hopefully moves that stock off your shelves.

To set up your products markdown, you can use this formula:

Markdown = (difference / current selling price) x 100

Discount strategies to keep your profit safe

Giving a storewide/sitewide general discount may sound like a good idea (eg 25% off all items), but if you put all the numbers on the table, you'll see there are other strategies that keep your profit safe and can be more appealing to the customer. Here are three strategies perfect for small businesses:

  1. Give customers a larger discount based on quantity or cart value. You can significantly improve your profit margins on each order. As a result, many brands have turned to the “buy more, save more” promotional model

  1. Offer a progressive discount on selected items – eg buy one get 15% off, buy two get 30% off, buy three get 40% off. This type of offer helps make your product appealing and reachable for potential customers, while serving as an amazing (and limited-time) offer for regular customers

  1. Create a selection with deadstock items and give a more aggressive discount (up to 60% off). Remember to do the math before to make sure the discount is still profitable for your business

Keep in mind:

  • All prices must cover costs and profits

  • The most effective way to lower prices is to lower costs. Always check your supllier's prices and compare with different suppliers to ensure it is still a good deal

  • Benchmark prices to analyze if the costs of your products are competitive, lower or higher than your competitors

  • Take advantage of Black Friday to get rid of your deadstock (or at least a part of it)

In order to have a successful Black Friday campaign, it is crucial to understand who your customers are, the reasons behind purchases and the acceptable upper and lower price limits. Format your pricing strategy alongside a coordinated promotional strategy across all online channels – websites, emails and social – to maximize sales during the period. And don’t forget – this is the perfect time to facilitate gift giving for the Holiday season.

We are also preparing a new START feature: formula calculators tailor-made for entrepreneurs. The easiest way to calculate and estimate profits, expenses and more. Our pricing formula will help you find a fair price for your product – so you can turn your entrepreneurial idea into a profitable small business!

Check out the START by WGSN blog for more posts with business strategies for small brands and fashion entrepreneurs. Click here!

Become a START subscriber and access our exclusive 20-page Black Friday strategy guide in e-book format. Click here and join us in a seven-day free trial


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