Getting your pricing strategy right is crucial for your store’s success. You don’t want your prices too high because you’re risking scaring off your potential customers. On the other hand, you also don’t want to set your product costs too low and miss out on profits.

In short, you have to find the perfect balance between what your product’s worth, your customer’s sweet spot in price, and how much you wish to earn in profit.

It’s no easy job, but luckily, you’re reading this article. In this blog, we’ll walk you through every step when it comes to pricing your skincare products, from understanding the basics all the way to pricing strategies & tactics.

Ready to learn how to price skincare products in your store? Let’s go!

Table of Contents

Pricing ABCs: understanding your costs

No matter if you’re just starting a skincare line or been in the game for a while, understanding the terms and processes of pricing is always valuable to stay informed.

Let’s take the Selfnamed BiPhasic Make-up Remover as an example through which we’ll learn all these concepts.

First, the product cost. These are all the costs that have to do with making a product and getting it ready for sale. It’s relatively easier if you sell private label skincare, because your white label partner has already done all the work and calculated the production costs. For the BiPhasic Make-up Remover, it’s $12.90. Simple enough, right?

Next, margins. It shows how much profit you make from a sale, relative to the product’s retail price. The formula for calculating margins is (Profit/Price) × 100.

So let’s say you decide to sell the BiPhasic Make-Up Remover for $20 a piece. Here’s how you figure out your margin:

Calculate the profit.
Formula: Retail price - Product cost = Profit
In our case: $20 - $12.90 = $7.10
Calculate the margin.
Formula: (Profit / Price) × 100 = Margin
In our case: ($7.10 / $20) × 100 = 35.5%

So with this calculation, we can say that by setting a $20 price on the Make-Up Remover that cost $12.90 to make, our profit margin is 35.5%.

And now, let’s look at markups. It’s how much you add on top of the product cost to determine its retail price. The formula to calculate markups is (Profit / Cost) × 100.

Here’s how to calculate the markup based on our trusted BiPhasic Make-Up remover:

Calculate the profit, same as before.
Formula: Retail price - Product cost = Profit
In our case: $20 - $12.90 = $7.10
Calculate the markup.
Formula: (Profit / Cost) × 100
In our case: ($7.10 / $12.90) × 100 = 55%

To sum-up in simple terms, a margin is focused on what you make from the sale, whereas, a markup is how much you add to the product cost. In percentages, your markup will always be higher than the margin.

Most common costs for a skincare business

Now that we’ve figured out the basics, we can go over the costs associated with running a skincare dropshipping business. If you’re only starting a skincare line, this should be really handy for you!

Product costs

As I’ve mentioned earlier, product costs include everything that went into making this product. That’s sourcing ingredients, formulating the end product, packaging, certifications, and such. Luckily, if you’re selling private label products from a trusted partner, they’ve done all of that for you.

Going back to our example from above, the BiPhasic Make-Up Remover, Selfnamed’s sourced the ingredients and formulated them into a quality cleanser that’s EcoCert and COSMOS certified. All of that for the price of $12.90. Quite a steal, isn’t it?

Marketing costs

Having great products in your store alone won’t get you sales — you need marketing to tell the world about your products!

First of all, if you’re starting a skincare line and your business overall, you need to create your brand’s identity. That includes a logo, brand design with colors and all the other necessary elements, and your brand’s story.

Be honest with yourself and think of which areas you can cover yourself (for example, the brand’s story) and which you’ll have to outsource (logo, visual identity, etc.). No matter if you’re taking up the task yourself or with the help of a professional, it will require at least some financial investment.

When you’re outsourcing jobs, the costs are quite clear, based on the professional’s rate and the time they spent on working for you. But when you’re doing such tasks yourself, it might seem like they’re free. But they actually aren’t because you’ve spent your precious time on it and your time, like all of ours, costs money.

To make calculating the marketing costs easier, I suggest you come up with a reasonable rate for your own work and go from there. That way you can include time spent on marketing in your total costs.

Some areas that you’ll spend money on in marketing might be: product photography, social media management, partnerships with creators, running paid ads, upkeep of your website, and more.

Warehousing and fulfillment costs

Warehousing and fulfillment costs will depend on your business model. Let’s look at the two most common ones: wholesale (buying in bulk) and dropshipping.

When you’re a wholesaler, you manufacture the product yourself or buy products in bulk to sell further. All of this already comes with a significant financial investment. But let’s focus on the warehousing and fulfillment costs here.

Running a wholesale business means you’re selling to businesses (retailers) who sell your product to the end customer. Typically retailers will expect bulk orders, therefore, you’ll need to produce and store large amounts of products before receiving payment. This can result in the need for a big storage facility, as well as investment in fulfillment lines (more space and staff).

But when you’re doing skincare dropshipping, these costs fall close to 0. Yes, really! With this model, you don’t need to rent or buy a warehouse, because your private label skincare partner takes care of that and adds it all up to the product price (like, the $12.90 for the BiPhasic Make-Up Remover).

In short, you have to look at both options and compare bulk vs dropshipping, to better understand which one’s better for your skincare business.

Of course, this list isn’t 100% complete but can give you a good overview of the main things you’ll need to spend your hard-earner money on. To get the most precise calculation, don’t forget to also look at packaging, miscellaneous labor, taxes, tariffs, and overhead costs (licenses, offices, etc.).

Pricing strategies for your skincare brand

Now that we’re aware of the financial investment that your business will require, we can finally have a look at different pricing strategies for your products to make the decision on how to price skincare products in your store.

Cost-plus pricing strategy

Cost-plus pricing is quite straightforward. You take the product cost and add a fixed markup on top.

As we know, our Make-Up Remover costs $12.90 and, let’s say, you decide you need to sell it at a 3 × markup to cover all your costs and make profit. That’d make the final price of your product $38.70.

This pricing strategy is simple and predictable, but you have to be careful by not underpricing your premium products or overpricing budget items.

Value-based pricing

Instead of basing your pricing on covering your costs, value-based pricing focuses on how much value your customer is getting and how much they’re willing to pay for it.

Our Make-Up Remover might only cost $12.90 to produce, but what if it offers such a value that no other cleansers can or has luxurious packaging? That might give you the opportunity to set the price point higher.

This way you price your product based on perceived benefit, rather than just ingredients and production costs. At the same time, you have to know your customer really, really well to take such a brave strategy and know that they’d be willing to pay a higher price for the product.

Competitive pricing strategy

The name of this strategy should give you an idea what it’s all about — competitive pricing involves setting your prices in relation to your competitors. You can match the prices, undercut or exceed your competitors’.

Your first step when researching this pricing strategy should be research of your competitors, see what they charge for similar products to yours.

So, if your competitors price make-up removers at $25–$35, you can choose to take home less profit but set a price that’s more friendly to your customer (like, $23) or try to change the customers’ perception that your product is better than others and set the price higher (like, $37).
But you can also set your price somewhere in the middle to still stay appealing to a larger number of potential customers.

Premium pricing strategy

This strategy includes positioning your product as luxury in order to charge a premium price for it.

This pricing relies on brand perception, exclusivity, and luxury appeal, so usually this would be a better option for brands that have been around for a longer time and have a strong brand image.

But at the same time, with some careful research and careful curation of your brand’s identity, you might even go with this pricing strategy from the get-go. This pricing enhances brand prestige so it’s possible to influence your potential customers for a purchase this way. But I do suggest researching it first and making sure your marketing is on point.

Scarcity pricing strategy

With scarcity pricing strategy, you’re creating urgency and demand by limiting product availability (either by time or quantity). This strategy is often used for seasonal drops or collaborations with artists or creators.

Usually, you’d use language like “limited edition”, “limited drop”, “only 500 left” to drive that urgency and FOMO in your customers that encourage quick purchasing decisions.

I’d suggest not overusing this strategy. Utilize it sparingly because otherwise it could lead to customer fatigue or even mistrust in your brand and its products.

Add-on pricing tactics

Now that we’ve learned several pricing strategies, we can have a look at some add-on pricing tactics to increase average order value, encourage reorders, and build customer loyalty.

Bundles & kits

By selling bundles, you’d be offering multiple products together at a slightly lower price than buying each item separately.

To figure out how to price your bundles, add all the individual prices, offer a discount (typically 10–20%) to make the bundle feel like a deal.

Selling bundles can increase your average order value, make decision-making easier for new customers, as well as encourage your customers to try more products from your range. A win-win, right?

Discounts

Discounts are temporary price reductions, but they should be used with caution in order to avoid damaging your brand value.

Here are some popular discount types:

Welcome offer for new customers (usually, 10–20%),
Seasonal discounts (like Black Friday or Boxing Day in the UK),
Clearance or last-chance sales on products you wish to get rid of.

Discounts can be a great tool to attract first-time buyers, help you clear inventory (if you’re holding stock yourself), and boost conversions.

Loyalty incentives

Loyalty incentive is a tactic where you reward repeat customers and encourage consistent reorders which are key in skincare dropshipping.

Here are ideas for some loyalty incentives:

Loyalty programs where your customers get points for money spent, redeemable for discounts or for free products,
Refill programs where you can offer 10–15% for automatic refills or refill packs,
Reorder incentives like emails or notifications around the time your customer might need a refill on their product.

Such incentives will help you build a more lasting and trusting relationship with your customers. They’ll feel valued when you remember them and offer something special when they come back to your store.

Nailing your pricing strategy

As I mentioned above, pricing your products is definitely not a walk in the park. It’s about understanding your costs and your time spent on your brand, as well as recognizing your customer and your brand’s value.

Every decision you make will shape how your brand is perceived so don’t leave figuring your pricing last, because it should be intertwined with your brand’s image, its marketing, and so on.

My biggest suggestion to you is to carefully go through all the different strategies and see how you feel about them and how it impacts your customers. Does your chosen strategy feel right to your brand? Will your customers understand why you’ve chosen this path?

Take the time to run the numbers, test your methods, and don’t be afraid to adjust as you grow. Good luck!

How to Price Skincare Products: A Step-by-Step Guide