You're Priced to Fail: What Candle Makers Need to Know About Margins
Pricing candles correctly is crucial for profitability, growth, and sustainability in your candle business, going well beyond the outdated 3x markup rule.
• Understanding your target customer and what they're willing to pay should be your starting point • We price our classic 10oz candles at 5x cost ($5.50 cost → $26 retail price) • When wholesaling, retailers pay 50% of retail ($13), still giving us solid profit margins • Visit stores where your target customers shop to research pricing in your desired niche • Differentiate your product visually to stand out in a crowded market • Proper pricing allows for promotional strategies like "buy 3 get 1 free" that increase average order value • Free shipping thresholds can encourage customers to add more items to their cart • Consider your long-term costs when setting prices, as bulk purchasing will lower your per-unit costs • Re-evaluate your pricing strategy every six months based on market conditions and performance • Your margins must support discounts, reinvestment, hiring, and future growth plans
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So if you've been pricing your candles using that 3x rule or worse, you've just been guessing you're probably leaving money on the table. In today's episode, I'm breaking down what it really takes to price your candles for profit, growth and sustainability. Whether you're just starting out or you've been selling for a while, this might be the wake-up call that your pricing strategy needs. So let's talk about pricing our candles. This is always such a hot topic because we get caught up so often in what everyone else is pricing their candles for. So you will often see other candle makers say hey, this is a eight ounce candle. It costs me $5 to make it. How much do I sell it for? And then you'll get everyone's opinion on that, and not that any of those people are necessarily wrong, but there's a lot more that goes into what we should be pricing our products for than the cost of goods. Because in the volume that we purchase our candle supplies, at the volume that you're purchasing your candle supplies at, and what Bath Body Works is purchasing their products at and some of that just started yesterday we're all getting different pricing on all of these goods. But that doesn't mean that we can sell our products at all different prices. We first have to understand and figure out what niche that we want to be in. And then what is that target customer that is going to be buying our products? And we really have to figure out who they are and how much they are willing to spend on candles so that we can provide that product to them that gives them the value that they're looking for.
Speaker 1:
Some consumers will only buy a candle if it's more than $75. They want a luxury candle. There is a perceived value that goes along with it, where we believe that if it costs X amount of dollars it is going to be of possibly higher quality or the presentation of that candle is going to be nicer in their home. Or sometimes it's just we buy things to impress people right, to have things. You know, whether it's our clothes or our car or our home, it also pertains to our candles too. People will sometimes just not buy.
Speaker 1:
I personally, like won't buy a candle at some of the discount bargain stores. The perceived value to me is it's probably not going to be a soy candle, which is what I prefer. It may not be made with the same ingredients, probably mass produced. It may not be supporting a. It won't be supporting a small business Generally, if you're buying it at a big spot, big box, discount, retailer, and those are the kinds of candles that I like to buy, I like to buy locally, you know, made or small business supporting them, because we are one of those. We are who our target customer is. So figuring out who is it you want to sell to. Can't sell to everyone, that's just the reality. We can't try to make everyone happy.
Speaker 1:
So when you're first starting out, oftentimes you'll see makers where they are going to have a whole variety of sizes of candles, and we tried it. When we first started, we had our 10 ounce jar, then we did a five ounce, 10, and then we did a 14 or a 12 ounce ceramic. That was more of our higher end, it was nicer. So we had a wide range of candles. When we first started, we realized that our customer is not that higher in ceramic. Um, so we we ended up having to get rid of those and end those, and so, to this day though, we still have our classic glass, 10-ounce glass, and then we have our 5-ounce tin candles, and they do really well, and so those are always going to be a staple in our brand. We do now do lines and collections that are geared towards that customer that wants to spend more money. We have a 12-ounce really nice vessel that we get from AXE and those go for $52 in our store but they come in a box. The presentation is different. But also, even through our three we have three store locations. Where those locations are are different customers. But you have to have your core niche and your products really dialed in and understand what they're going to do as far as what they will spend. Okay, so how do we figure out what our customers will spend on candles? Well, let's go to where our customers are. When you are building out your candle brand, you've got to have an idea of who you want to be selling, to Go to where those customers are currently buying candles and figure out what they're spending.
Speaker 1:
So for us, our goal when we started our businesses in our house was we were just going to go down the route of wholesale. We weren't necessarily thinking brick and mortar to where we are right now, but we wanted to just do wholesale because it is easy to get into and you can do it while running a business at home. So our customer avatar, the niche that we wanted to be into. We wanted to get our candles into women boutiques and in downtown shopping areas that women buy clothes, accessories, home goods. In these smaller boutiques the prices are going to be a little higher. They generally are going to have more disposable income when they're shopping there.
Speaker 1:
So we go into all of these stores and see the candles and they range. In the stores that we shop they range from, you know, 24 to 32. These aren't higher end luxury. These are just kind of, you know, the middle range shops in a downtown, locally supported shopping area, because that's exactly where we wanted our candles. So we thought, okay, our base candle needs to be between 24 and $32. We looked at the sizes of all of these candles to compare. Okay, these candles are between eight and 12 ounces, so we're not we're not pricing out the larger ones or, you know, smaller or smaller candles to get our baseline with. So the average price was $24 to $32. And then the sizing was between 8 ounces and 12 ounces. So we had a really good baseline of okay, if we want to be in this store, we need to create a candle that's going to fit these couple metrics.
Speaker 1:
We also need to look at what are the candles that are in these shops. What are they made of? Are they highly fragrant? Are they made with essential oils? What kind of wax are they made with? So, diving into all that, we can really understand our customer more that we're trying to build our business off of. So a lot of the candles are leaning towards the more eco-friendly if I'm going to use that word of a soy versus a paraffin, and I'm not one to get into the science of both. I am in the business of selling candles so I know these are what are in these stores that I want my candles in. So I need to replicate those type of candles. So that's why we went down the route of a soy candle to start. Now with our brand, as we've expanded, we also have a coconut soy candles that we do for a couple of lines. But that's the reason why we went down the road of soy, because it's what our customers are going to want. So we want to make a candle that's going to fit into those stores and we want to price it based on that.
Speaker 1:
But we also want to stick out a little bit from them. What we realized when we were shopping in all of these stores is most of the candle labels were white labels with very minimalistic, like a cursive handwriting or just a plain font, right. So it was a very minimalist candle, which is fine. But to stick out, we need something different. That's why all of our candle labels are bright, colorful. They, they stick out and people all the time say I love your branding. I love your branding. We have our lighthouse on there, we have our word mark underneath our logo there, and all the labels are colorful. So that is how we wanted to differentiate ourselves from what was already in those stores, so that those shop buyers that are buying all the products that to fill their shop with will say, oh, this is different, this is unique, this is let's check this out. And then you back that up with a really solid candle. They're going to want it in their store.
Speaker 1:
So getting off topic of pricing a little bit, but that's how we figure out what shops we're going to go into and then how we are going to make ourselves stick out from what they're currently carrying. So staying up on the trends, seeing what everyone else is doing. It doesn't mean you have to do what they're doing. A lot of times you actually want to be different, to make yourself stick out, and so that's what has done us very well. You can't just base your pricing on going to weekend markets Every time we do markets. That's how we got started, and we started getting a lot of traffic was by doing markets on the weekends.
Speaker 1:
We were always the most expensive candle, but our candles are probably better than others as far as the presentation would go. Now, what's going into the candle? We're most likely all buying our waxes, oils, wicks, vessels, all these types of things from the same handful of suppliers. So I would never say that my candle is better than someone else's. But we did spend a little bit more money on our branding and our presentation and just the setup of our booth to make it feel where our customers want to shop.
Speaker 1:
So we are always the most expensive out of markets, but that's not a bad thing, and some people, I do feel, get caught up thinking, oh, I have to lower my prices because of that, and in reality you absolutely don't. There are going to be people that are going to come into our booth and it has happened and they see that it's a $26 candle and they almost fall over, right. So they like get out really quick because they're used to spending, you know, $10, $15 on a candle. They're not going to spend $26 on a candle. That's totally fine. That's not my customer. There's also going to be the people on the other side of the spectrum where $26, they're thinking, oh well, what's wrong with this candle? Why is it only $26? Um, and they're not going to want to buy it because it's not expensive enough for them, right?
Speaker 1:
So sometimes when we say we go car shopping and it's hey, I have $35,000 to spend, you know, that's what I can budget for 35,000. Right, if I see a car on a lot and it's only $12,000, like, oh, like it's, I'm not even going to look at it. You know that. That's how we, that's how we think a lot because it's like oh, it's not going to have the, it's not going to have the stereo, it's not going to have the safety features, it's not going to last long. We have this perceived value that we attach to products. On the other end, it's oh, I'm not going to, I'm not even going to look at a car that's over my $35,000 budget because I can't afford it. Okay, so now we know who we're making a candle for. We know how much money that they will spend on that candle. Now we have to see if the math is going to work.
Speaker 1:
So we have to figure out our cost of goods. Cost of goods is all of the different expenses that are going to go into making this candle. It's going to be the vessel, the label, the warning label on the bottom, the wick sticker, the w. It's going to be the vessel, the label, the warning label on the bottom, the WIC sticker, the WIC, the oil, the wax, the box, if you're going to use packaging. Every different expense that's going to go into making that candle is what's called the cost of goods. Now we use Inventora, we like Inventora. I'll actually link them in the show notes below. That is how we keep track of all of our cost of goods is using them. There's CraftyBase, there's other options out there, so certainly check around and see which ones make the most sense for you.
Speaker 1:
The way those work is you put all of your products, your raw supply products, into their system and then you build out a recipe. So, for instance, this mahogany driftwood candle, it's got like three different oils in it. Then it's got 10 ounces of wax, it's got an ounce of oil. When you put all of that into your recipe and it pulls all of those costs individually for you so that you know what your total cost of good is. So when you do all of that math, this candle for us, our 10 ounce candle, is going to cost us between 475, 480 and like 550. The oil prices is really what dictates the difference. You know all of our labels are going to cost the same. The wax is going to cost the same. All of that the oils is what's going to be a different price based on which oils we're using is what's going to be a different price based on which oils we're using. So, from that 475 to 550, even up to the 575 range in some of our oils, for our classic candle, we sell that candle for $26. So we're doing 5X the cost of goods.
Speaker 1:
So if we were going to go off of the metrics that a lot of people would use of the 3X or 4X, we just wouldn't be able to sustain our business. You have to think of the other costs that are going to go into your business. Are you going to be able to do wholesale that way? Are you going to be able to reinvest in your business? Are you going to be able to run ads for your business, are you going to be able to hire people? All of these things are factored into your pricing and so if I am making this candle and I am only getting a three X return, I'm not going to be in business. That's just the reality of it. I have to have a larger margin for that. So you have to start that. You have to think ahead, not just if you're making candles now, but what direction do you want to go Now?
Speaker 1:
If you are just making and selling candles on the weekends, doing craft shows, markets, which is completely fine, that's actually. I sometimes envy that. Sometimes I was back just working my nine to five during the week selling candles, you know, periodically on the weekend. But we are all in with our three stores, our growing wholesale accounts, that we we're all in so that we're not going back. So we have to make sure our pricing is right and doing wholesale is one of the first directions that we went with our candles. In fact, we actually have a mastering wholesale course where we actually teach you how to do your wholesale the way we do ours, and one of the things that people get caught up on is their pricing.
Speaker 1:
Because if this candle costs me, say, $6, to make some people believe that it's your wholesale pricing is based on what it costs you to make the candle. But that's backwards. You have to discount the price of retail to come up with that wholesale price. So for our $26 classic candles we wholesale those for 13,. That $13 is what they are going to buy our candles from us for. And so if this costs us $5.50 to make, then there is a what is that $7.50 profit there, right? So we make the candle for $5.50. We sell it for $13. They're going to turn around and sell it to their customers for $26.
Speaker 1:
So if you think about that, if this candle, that is $5. 550, if I'm doing just 3X markup on this, say this is a $5 candle. For easy math, let's say this candle cost me $5 to make, and if we were going off of the philosophy of 3X, that would be a $15 candle, right? And so when you wholesale that candle, instead of $15, any retailer is going to want to only pay half, so that $15 goes to $7.50. Well, that candle cost me $5 to make. Why would I sell it for $7.50? I wouldn't. I wouldn't only make $2.50 on that candle. That's not a sustainable business. So that's where you break down. If you ever want to do wholesale, you can't go off at 3X, even 4X.
Speaker 1:
If this is a $5 candle, it costs me to make, and if I do 4X on that, that's going to be $20. Wholesale price on that's going to be $10. If it costs me $5, I'm selling it for $10. There's not a lot of room there. It's great that I'm doubling what my cost of good is, but I'm's, I'm not gonna be able to pay my bills that way. Right, I'm not gonna be able to pay my overhead, I'm not gonna be able to pay people to help me, and there's also your time is going to be involved in that.
Speaker 1:
So, on a candle like this, we sell more 13. I'm making sure that I'm making at least like seven, 50 on that, um $8 on that Cause I'm selling you profit on there. And so, again, this is a $5 candle. In our retail stores we're selling it for 26. So we're selling this over 5X. And it's because of the different avenues of selling. Of course we sell direct to consumer. That's where we're going to make the most profit, but we also do the wholesale as well.
Speaker 1:
Okay, so what I've explained now this far is that our pricing strategy is putting our products at 5X or 6X the cost of goods. So the pricing strategy I recommend is figure out what your customers will spend for candles and make those candles at the same value for as least cost as possible for you, and try to get to at least 5X. If you aren't getting to 5X, you may have problems if you plan on scaling your business. Now again, if you're just wanting to keep it small, keep it local, sell direct to consumer, that's totally fine. Direct to consumer, that's totally fine. If you're wanting just to sell to people and not actually, if you don't want to have some of the overhead costs that go into wholesale, if you're not wanting to have a brick and mortar or anything like that, you can then not have quite as high of a margin and you'll be okay. But really think about if you're going to want to go wholesale, because most people want to go wholesale. And another thing about wholesale is the price structure that I broke down to you shows where we're just making enough that I'm happy with. But if you're going to be like on FAIR or those other platforms that are going to take an additional 15%, you're literally not going to be making any money if you don't price your candles correctly.
Speaker 1:
That is the biggest complaint about those that are selling on fair. Our products are out on fair and we've gotten some fantastic accounts through fair, but our wholesale strategy is doing outreach and getting those customers ourselves. That's what we teach in our course and that's what's done us really well. On this date we have 140, 142 wholesale accounts. We've probably gotten 15 of those from fair. The rest of those is all from directly doing outreach to stores, and then that's what we teach. But those orders that come through fair and they take that additional percentage, like I cringe every time I see those orders come through, like I'm happy to get the order, but then I'm like, oh gosh, like they're taking so much. If you want to go down the route of wholesale, you really got to have your pricing dialed in. So a couple of the reasons why we don't like to follow the 3X or 4X strategy, if I haven't convinced you already that that is not going to work for you.
Speaker 1:
Long-term discounts Do you want to run holiday promotions? When it comes to doing Black Friday, cyber Monday deals, you have to have a deal. People are looking for minimum of 25, 30% off. You can't run just 10% off for Black Friday or Cyber Monday Like it's not going to bring you a business. It's just not. People are going to be looking for deals and you got to have margins so that you're able to do those kinds of discounts. So we'll do 30% off for Black Friday and Cyber Monday. That is what we've realized is our sweet spot over the last three years is that is where we will start to get sales. Of course we hate losing 30% of full price, but the reality is that's what you have to do to make those sales and usually those sales will end up being larger. People will buy more because it's a deal.
Speaker 1:
Also, when we're out at markets, our number one pricing strategy when we do markets is offering buy three, get one free. So when we have our candles out there on display, people like one, they're shopping around, they're looking. I always tell them hey, buy three, get one free. That has raised our average order value up significantly. Now you might think, oh, I can't give away one of my free products. Essentially, what it is is it's giving 25% off of all of them and if you're not able to do that in your business, you're not able to run deals that people are going to want and you're just not going to grow your business. We have sold so many candles doing the buy three get one free that that is what we do on our website and we have more orders that people are buying four candles versus people that are just buying one. So it is encouraging customers to spend more money. But you have to have your margins built that you can sustain discounting. Same thing with your.
Speaker 1:
If you're not wanting to do like buy three get one free on your candles, you can also think of another item to give away. Recently people have not wanted to spend as much money when they've been shopping. There's just been some uncertainties in the economy that people are holding a little tighter to their money. So we have been testing out buy two candles and get a free room spray. Our room sprays only cost us like $2, two and a quarter to make. They're really nice and it's a great incentive to get someone to instead of buying just one candle. Now they're buying two candles Our candles that are $26, they are now spending $52. And sure, we're giving away a free product, but what we're giving them is a $ dollar product. So in reality, the profit on. Both of those candles are still there and we're just giving away a two dollar product. But it's definitely worth giving that product away to get them to buy another full price candle Because, again, this candle, that is twenty six dollars. If it costs us five dollars to make, we're making twenty one dollars of profit on that candle. So it's worth eating $2 worth of a room spray to to bring in that more income.
Speaker 1:
So think about strategies that you can do to increase your average order value. Aov is what it's called in the retail space. You want to incentivize your customer to spend more money because there's going to be much easier to sell to that customer than to get a brand new customer. If someone's on my website shopping around, I want them to buy. I don't want them to go away because I'm running ads to get people to come to my website. I'm working on the SEO. I'm doing all these things to get someone to my website. Once they're there, I need to convince them to buy a candle, because I know that once my product is in their hands and they're burning it, they're going to love it and they're going to come back and buy more. That is the ultimate goal. It is so much less expensive to do marketing towards someone that's already a customer of yours than it is to go out and acquire a new customer, so keep that in mind. So if someone's on my website, I am going to have my little scrolling banner saying, whatever the promotion is, whether I'm doing, buy two candles, get a free room spray, or buy three candles, get the fourth one for free. Whatever I'm doing, I'm trying to incentivize them to spend with me.
Speaker 1:
Today we offer free shipping If they spend over a hundred dollars. That incentivizes them and the little trick that we do. We used to do it at $75. It was buy three or it was spend up spend $75 and get free shipping. But with our candles being buy three, get one free, they bought three candles. It was $78. They got a fourth one for free and, being $78, they also got free shipping. So we actually raised our shipping um free deal to a hundred dollars. So now they've got four candles in their cart, it's $78. Cause one of those is free. Um, now they are spending more money to get over a hundred dollars for that free shipping. So they're adding an additional candle or an additional product from our website. So that's worked really well for us. But again, this all goes back to what your pricing is, because you're not going to be able to do discounts to um incentivize people to spend more, if it's not built in on the front end for you to be able to give away your products at a reduced price.
Speaker 1:
Other things we're going to want to do is reinvest. We put a lot of money back into our business. We're trying to grow it. We have three stores now. We keep growing as far as our wholesale and our team Our teams are growing right. We're hiring more people to help us run our business. If your margins are too small, you're not going to be able to do any of that, all right. So I recommend that, if you haven't already really dive into who your customer is, who you really want to sell candles for and I totally get that we want to sell candles to everyone but you've got to have that dialed in, all right. So hopefully this helps you out a little bit.
Speaker 1:
So let me just recap some. We don't go off at 3X or 4X. We go off of what is our ideal customer going to spend for a candle, and then we have to make a candle that matches that value for as inexpensive as possible. So whether that's going to end up being 5X, 6x, 7x sometimes, especially when it comes to room sprays and other products. Wax and Melts is another one of those. In fact, our wax and melts costs, like us, like about two bucks. We sell them for nine. So that's showing you we're like a four and a half X on those. So is your pricing matching what your ideal customer is going to spend?
Speaker 1:
One thing to keep in mind is right now you might not be able to do 4X, 5x, 6x like I'm suggesting to do, because you're buying in such small quantities. If you're buying your wax by the box instead of buying several boxes at a time, your shipping costs are going to be higher. If you're buying oil by, say, like eight ounces instead of a pound of your oil, there's a significantly difference in prices there. But at least when you're starting out I realized you might not have the margins of 4X 5X that I'm saying that you really need to have for long-term growth. But look at what you'll be able to buy those products for if you do end up ordering more at a time. So go say, you only have $300 to buy on supplies, so of course you can't buy five boxes of wax, right, you're going to buy a little of this, a little of that. I totally get it. So your cost of goods are going to be really high compared to your price point.
Speaker 1:
But also price it out to see what will it cost long-term for this product. If I am just buying, you know, eight ounces of oil and I'm buying my wax by the box and I'm only buying a few wicks at a time and all of that, this candle, that is generally costing me $5.50, this is probably going to cost me $7.50 or $8. You know. So I realized that at that price point $26 is going to be almost three and a half four X. But you got to look at long-term. As I grow, I'm going to be able to buy all of these products in bigger bulk. What's it cost? And go and create a cart on your supplier's website? What is it going to cost when I go to the next level? What is it going to cost when I buy that oil by the pound versus by the eight ounces? And what is it going to cost when I'm buying three boxes of wax at a time versus one, because the reality is is the cost of wax might not go down much. The shipping is going to go down dramatically.
Speaker 1:
So we got to understand that our pricing for our products right now might not be the same in six months. So look at both of those Again, also with your pricing. Reevaluate in six months. So look at both of those again, also with your pricing. Re-evaluate every six months. Say, hey, what's working, what's not working, what can I possibly raise my prices up a little bit? And then what items aren't selling at some of these price points that I might need to lower my costs? We do that all the time. We're always re-evaluating our costs, um to see if it makes sense and what people are buying our candles for.
Speaker 1:
Right now, the economy is in a tough spot. We would like to raise our prices up because our cost of goods are going up, but we also know that's going to cost us some sales. If my $26 candle goes up to $28, $29, $30, where ideally it should be is that going to cost me sales and is it going to justify the difference? So that's something that we have to think about and we think about it all the time. So hopefully this has helped you. Make sure you start with your audience, understand what your numbers are and price your candles for the future, not just for today. So thank you so much for tuning in. Have a fantastic day. If you want to check out some free resources we have on our website, you can do so in the so notes below. If you found this episode helpful, we'd love it if you'd leave us a rating and a review. It really helps us reach more makers like you. We'll see you next week.
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