PayPal Fee Calculator

Now that we’ve selected what types of products people want to sell, let’s now move on to a question that I get asked a lot here at the Ecomm Clubhouse, and that is this – “Sarah, how should I price my products?”

And by the way, this is actually an updated video. So if you’ve previously watched my pricing video in the past, I highly recommend that you watch this one too. My other video was a little bit confusing, admittedly. So hopefully this updated version should be a lot clearer for this video. We are mostly focusing on how to price your frontend products. A front end product is the first product that a customer sees, not an upsell product. Although by using the profit calculations that I’m going to teach you in this video, you should probably be able to easily choose how you’re going to price your upsell products as well.

Now I’m going to be brutally honest with everybody here. People often ask me this question, hoping for magical answers, some magical price that they should price their products at for the highest conversion rate. But unfortunately, that’s not how this works. Pricing is subjective.

Let’s take t-shirts. If you walk into a target store, you’ll find graphic tee shirts for $10, $15 or $20. And if you go into a well-branded print on demand store, such as smash transit, which got it started on Etsy and then expanded into its own Shopify store, you’ll find t-shirts there for $30 each i.e. $29 and 50 cents.

And if you go and buy t-shirts from a design, a brand such as Supreme, well, you’ll pay up to $400. Sometimes even more.

For me personally, I sell my tee shirts for $30 plus $4 for shipping, usually unless I’m running a special offer. So what does all this tell you? All of this variation tells you that there is no perfect price. So if you were hoping for a specific, magical answer. Unfortunately, I can’t give you one. However, while there is no perfect price, there are some best practices to use when choosing how to price your products. And that is what I’m going to teach you.

And even more importantly, I’m going to tell you what not to price your product set. And we’re going to start first of all, with print-on-demand products and then move on to pricing products that you would buy from AliExpress for dropshipping.

So with print-on-demand, while it is true, that pricing is subjective. You don’t want to price your products too low. Otherwise you will make no profit after expenses. So let’s use t-shirts for example, on print to find the lowest cost tee shirt is the Gildan 5000.

This is a great t-shirt to start with and what I recommend for beginners. And once you have a top-selling design, you can let us switch to my favorite, but more expensive. T-shirt the Bella+Canvas 3001. This is what I sell because it’s a nicer t-shirt for customers.

However, in the beginning, until you find a winning design that customers love, the Gildan 5000 is a great starting t-shirt to keep costs low in the beginning. Well, with my favorite Printify factory, Monster Digital, they will make a Gildan 5000 t-shirt for you for $7.91.

So let’s take this number $7.91, and now come to your chosen supplies, shipping prices page, and find the cost to ship the t-shirt. Remember in this course, we are building a store that is focused on USA customers. So most of digital charge, $4 to ship a tee-shirt within the USA.

So at these two prices together, $7.91 plus $4, it’s $11.92.

But that isn’t all. We also need to account for the fact that payment processes have processing fees. So Shopify payments and PayPal will charge you for using the service. There’s no way around this. They definitely need to charge these fees because they have to process these payments for us and out of the two, PayPal does have the highest fees.

So we’re going to use PayPal fees as our base for figuring out how much we should charge for our products. Here’s a fee calculator for PayPal, which I have included a link above. So what I’ve done is I’ve typed in $11.91 and then selected the ‘To receive this..’ button.

This tells me the index received is $11.91, which is the money I need to receive to be able to pay for my product production and shipping phase to Monster Digital over at Pintify, I will need to charge at least $12.57, which we can round up to $13.

However, something to keep in mind to say, if you live out inside the United States like I do, then you’re going to have to use PayPal’s international fees instead. So just switch over to the international paper fees, which are slightly higher.

And when we do this, we see that to receive $11.91, we need to change at least $12.77, which of course we will round up to $13.

But this is our break-even price point without accounting for any other costs. So that means then that if you’re using a free traffic strategy, that doesn’t cost you any money such as Google SEO traffic, then you need to charge at least $13. And the same would apply if you had a different type of free traffic strategy, such as an Instagram main page. If you had an Instagram main page and you were driving free traffic from that, then your break-even price point is $13.

However, nobody wants to break-even. We all want to make money, right? So in actuality, you probably want to go and price your t-shirt. It’s more like $20, but it’s important when you do this, that you don’t charge $20 exactly. And see it take a few cents off of that. Price could charge $19.99 or $19.97 or $19.95. The most important thing is that you be consistent with this. So don’t charge $19.97 for some t-shirts and then $19.99 for others. Use the exact same cents for all of your products, pricing your products to a round number like $20 as associated with expensive clothing brands like Gucci, because they do this. Customers expect this type of pricing for high-end products. This type of pricing strategy is therefore “prestige pricing”.

And if you try to use it for products that are not high-end, you will look foolish and look like you don’t know what you’re doing. So customers will trust you less.

And by the way, this is allowing for free shipping. So you would say that your t-shirt costs $19.95 with free shipping. However, while $19.95 would be a great price for a t-shirt, if you had free traffic, it would not be suitable if you were paying for traffic, such as using Facebook ads. And this is because Facebook ads can be expensive. So we need to allow for the cost of the Facebook ad when we are pricing our product. So if you’re using paid ads for print-on-demand products, here’s a pricing strategy. I would recommend you take the base product price from your print-on-demand supplier, which in this case here is $7.91 and multiply it by 2. So we come to $15 and 82 cents.

And then at your shipping, which of course is $4. So now our base price is $19 and 82 cents.

Then you use the PayPal fee calculator to add in processing fees. I’ll calculate it for both Americans and for non-Americans.

Domestic

International

And this example, and both come to a very similar number. We would want to charge $21. So basically to break, even with a Facebook ad, you want to charge at least $21 i.e., $20.99. But this is just the minimum price that you need to charge, because remember you probably want to make some profit too. So well, here’s the reality while it can vary from industry to industry, the most businesses, a 10% profit margin and businesses average and anything above that is very good. Most of the store owners expect that they should be earning 40 or 50% profit margins from my experience, but they are being extremely unrealistic, especially if you’re using paid traffic.

A good starting point then if you were running Facebook ads to your store will be depressed. Your products that say $25 plus free shipping or $24.99. And of course you can apply this product pricing strategy to pretty much all the products in your store. So let’s go and take hoodies.

On printify, the lowest cost hoodie is a Gildan 18500. This is actually super comfortable by the way. So you could keep selling this hoodie into the future. But yes, Monster Digital, my favorite factory charge, $17.58 for it. And the price for shipping the hoodies is $8.

So if you add $17.58 and $8 to together that is $25.58.

Using the PayPal calculator, whether you live in the USA and optimistic paper phase or live outside of the USA like me and have international fees, you know that you’ll probably want to charge $27 as the minimum and this isn’t taking into account pay traffic when you’re selling your hoodie.

Domestic

International

So if you had a free traffic strategy then, and you want it to get a 15 to 20% profit margin, then you probably want to go and charge around $32 or $34 for your hoodie. So as you can see, hoodies can be a very expensive option if you want to advertise them with Facebook ads. So for most people, I wouldn’t recommend that they start off using the hoodies for the Facebook ads and I’d recommend that they pick something a little bit more affordable, such as t-shirts. But you can still sell a hoodie because it could make for a great upsell. You could sell a t-shirt for $25 and make this your frontend product that you advertise on Facebook.

And then when a customer buys this, you could offer them a hoodie to buy it as well and price it the $31.95, because your customer has already bought the t-shirt, which paid for the Facebook advertising phase.

This hoodie is just extra profit, an extra bonus for you. Plus keep in mind, you are going to make more money in the future. For most beginners, I recommend that they use Printify for the print-on-demand app. Well, Printify has a premium subscription. It costs $29 a month. So you don’t need to buy this in the beginning. However, it drastically reduces the cost of your products once you buy it.

For example, the Gildan 5000 t-shirt from Monster Digital will go down to a price to just $6.09. So once you’ve got the t-shirts selling regularly, switching to a predefined premium subscription is a no brainer. So remember, in the beginning, while you may be making a smaller profit in the long term, your profit margins are going to increase well beyond your initial ones.

These are just the minimum prices. You can charge more. I charge $30 for my t-shirts. Pricing is entirely subjective.

There is no answer to how much something is worth. We will just make it up in our heads. The phrase “The product is worth the price the customer is willing to pay.” is probably the most accurate thing that somebody can say. In regards to this question, the best way I need to understand how you should price your products is to understand how consumers decide how much they’re willing to pay.

And it’s through a process called price anchoring. Price anchoring is when consumers look at your product price and compare it to others and see how it matches up. So if you’re selling a t-shirt for $30, the customer goes, “Okay, well, how much have t-shirts elsewhere? If I go to Walmart, I know I can get a graphic tee shirt for $10 or $20.”

And I know if I go to Etsy that I can go to a cool and local clothing brand and I can get t-shirts they for $30. And I know that if I go get a design, a Supreme t-shirt, I might pay up to $400, maybe even more. So now your consumer has a range of prices to judge you as against. And they go, “Okay, well, is this brand similar to the sort of quality that I expect at Walmart? Or is it more similar to the type of cool indie clothing branding that I see on my favorite Etsy stores?”

And pretty much nobody new to the industry is able to create a highend streetwear brands. But, you can indeed aim for the higher-quality local, indie brand feel from the start, if you make their store experience curated, rather than feel cheap.

So you can aim to price your products for that. If you’re able to match that level of presentation by creating a curated experience in your store instead of a cheap experience. And so what I recommend you do is that you study premium print-on-demand brands like Smash Transit. See how they present themselves. Do you think that you can match this level of presentation?

Pricing is entirely subjective. If you can match Smash Transit’s presentation and the way that they create a curated experience for their niche customers, then you can charge $30 as well. But if you don’t think you can pull that off, that’s absolutely okay. You can lower your prices, but you need to be honest with your store’s level of presentation when you’re choosing how to price your products. So we’ve talked about how to price products with print-on-demand  but what about dropshipping? Well, it’s pretty similar, but it’s got a bit of a twist.

What you want to do is you want to start out by taking the price of the product and the price of the shipping and combining it together. So let’s say you want the drop ship, these blue light glasses here. Well, the cost of the glasses, straight dollars and 10 cents next, you want to add the shipping. So I selected the USA factory. So my customer would have fast shipping times and the cost of this was $4.79. So now you want to add them together, which is $7.89.

So we need to figure out now how much we need to charge. If we want to break-even after payment processing fees, using the PayPal fee calculator, we can see that whether we are using PayPal’s to mystic fee structure for USA, citizens will be slightly higher fee structure for people that don’t live in the USA, such as myself, we need to charge around $8.50, which we can round up to $9.

Domestic

International

So our break even price is $9. And of course, remember, as I stated earlier, you never want to say a clean price. You want to have say $8.99 or $8.97 or $8.95. You wouldn’t want to charge $9 exactly. Charging a round number like $9 is something that premium high-end stores like Burberry do, which is why this pricing strategy is indeed called prestige pricing.

So if you tried to do it for lower cost items, customers would find that really weird and unprofessional. But of course, remember, this is just our break-even costs. If we are having a free traffic source, this does not account for the cost of Facebook ads. So if you had a free traffic source, such as Google SEO traffic, or an Instagram main page, then your breakeven price point that you would need to charge would be $8.95, or $8.99 or $8.97, but you probably want to make some profit too.

Don’t you well remember an average profit margin in businesses, 10%. So if you can, 15 to 20% profit, then that would be great. So a base price of around $11 or $12 would be good with free traffic to still give yourself a nice profit margin.

But what if you’re not using a free traffic source? What if you were using paid ads such as Facebook ads? Well, if you’re doing niche, then we need to use a slightly different pricing strategy. And we are also going to have to use a slightly higher pricing strategy compared to what we were charging for print-on-demand products.

And the reason for this is that with print on demand, you have absolute control over the products that you’re selling. So you can design a product that is perfect for your target customer because of this, we usually expect our print on demand products are going to have higher conversion rates.

So when it comes to dropshipping, since we expect them to have lower conversion rates, we need to allow for a higher Facebook ad budget.

What you should instead do, is take the price of your product – so in this case here, it was $3.10, then the price of shipping, which in this case here was $4.79, add them together, which was $7.89, then times that number by 3, which is 23.67. Then round that up to the nearest dollar, so a good product price would be $24, i.e. $23.95

Why? Well, we just need to do the math. We want to allow that 50% revenue to go towards our Facebook ad budget. So $24 minus 50% is $12.

All right, so now we have $12 left over while we now need to remove payment processing fee.

And depending on if you live in the USA or internationally like me, it will be either $1 or $1.35. So let’s go with $1.35 for the sake of this video. $12 minus $1.35 is $10.65.

Domestic

International

And if we minus the product price from that, which is $7.89, then we are left with $2.76! So our profit is just over 10%.

Which is a nice goal to aim for, because an average profit margin for a business is 10%. And this is very important to keep in mind. I understand most new business owners think 10% is low, but those people have wildly unrealistic expectations. 

And remember: as you add in upsells, and customers purchase more than 1 item from you at a time, then this profit margin will drastically improve too and go up much higher than 10%, it will become more like 15 to 25%!

And of course, this is just the minimum. Dropshippers have generally been charging $30 with free shipping for these blue light glasses very successfully. So the 3 times pricing rule is a starting point. If you improve your store branding & marketing, you can push this much higher!

And remember, there is no “formula” to success. There are best practices based on what has worked in the past for sellers but that doesn’t mean new innovations can’t be made.

If from experience you think you should price products differently, go for it. If you’d like a guide to help you if you have no previous experience, then these pricing guides are a great starting point.

So keep these pricing rules in mind later as we’ll be using them in Step 3 when we add the products we’ve found to our store. For now, it’s time to move onto the next video.