Pricing a custom product so you actually make money
The usual approach is to take what the product costs, double it, and call that the price. It feels safe. It is how a large number of stores end up busy and unprofitable, because the product cost is not what a sale costs.
What a sale actually costs you
Take a 22 shirt sold for 40.
- Product and print: 22
- Shipping, if you offer it free: 5
- Payment processing: around 1.50 on a 40 order
- Returns and reprints: mistakes, wrong sizes, damage in transit. Averaged across orders, 3 to 5% of revenue is realistic, so call it 1.60
- Customer acquisition: if you advertise at all, this is usually the largest number after the product
Without advertising, that sale costs 30.10 and leaves 9.90. Not 18.
Add advertising. If it costs 15 to acquire a customer - which is modest for paid social - the same sale loses 5.10. Doubling the product cost is why.
Work from the margin you need, not the cost
Decide what a sale has to leave you, then work backwards.
For a store that does not advertise, a 40% gross margin is workable. That means the product cost is 60% of the price, so a 22 product prices at about 37, and you still have to cover shipping out of your share.
For a store that advertises, you need considerably more, because ad spend comes out of the same margin. A 60 to 65% gross margin is a more honest target, which puts the same 22 product at 55 to 63.
This is the number most people flinch at. It is also why stores that advertise successfully charge what they charge - it is not greed, it is that acquisition has to come from somewhere.
Shipping is a pricing decision, not a shipping decision
Free shipping converts better. It is not free; you are paying it out of margin. The two workable options are to build it into the price, or to charge it separately and accept a lower conversion rate.
What does not work is offering free shipping on a price set without it. That is a 5 hole in every order.
A middle path that works well is free shipping above a threshold set slightly above your average order value. It raises basket size and the extra item usually more than covers the shipping.
Price for the second sale
The first sale from a paid ad often barely breaks even. The profit is in the second and third, which cost you nothing to acquire. So the question is not whether one sale is profitable, it is whether a customer is.
That changes what to optimise. Product quality and delivery times matter more than squeezing the first order, because they decide whether there is a second one.
A simple check
Take last month. Add up everything that went out: product, shipping, processing fees, refunds, replacements, advertising. Divide by the number of orders. That is what an order actually cost you.
Compare it to your average order value. If the gap is not comfortably positive, the price is wrong - and the fix is almost always the price rather than the volume, because volume at a negative margin makes things worse.
- Product cost is not order cost
- No advertising: aim for 40% gross margin
- Advertising: aim for 60 to 65%
- Free shipping is a price decision
- Check the real per-order cost monthly