How to Price Arts and Crafts Supplies in New Zealand: A Margin-First Method

Start from the margin you need

Start with the margin the product must generate, not a competitor’s shelf price. Landed cost is the product cost after purchase, freight, insurance, duties and other costs required to get it ready for sale. Operating costs are expenses such as wages, rent, software, payment fees and fulfilment that the gross profit must help cover. Allocate a sensible share of those costs when setting your target gross margin.

Gross margin measures gross profit as a percentage of selling price: (price − landed cost) ÷ price. Use this formula to set the price: price = landed cost ÷ (1 − target gross margin). For illustration only, with a landed cost of $12 and a target gross margin of 60%, the price is $12 ÷ 0.40 = $30. Gross profit is $18, leaving that amount to contribute towards operating costs and profit.

Markup answers a different question: profit as a percentage of cost. The same $12 item sold for $30 has an 150% markup, not a 60% margin. Use margin when checking whether sales can support the business; use markup for describing the uplift from cost. Test the arithmetic in the product pricing calculator.

Use the right cost base

Use a product cost supported line by line. For imports, include the supplier invoice, inbound freight, insurance, duty and recorded customs charges; add payment cost only when a transaction record identifies it as part of buying that stock. For New Zealand-sourced items, include separately documented, attributable delivery to your store or fulfilment location, applying the same evidence standard. Leave unsupported costs out. Keep product cost separate from advertising and broad overhead. Compare supplier cost, landed cost and contribution after advertising: use landed cost for base economics and contribution for what remains. The product pricing calculator can test the arithmetic.

Make New Zealand tax treatment explicit

New Zealand GST is charged at a rate of 15%, according to Inland Revenue (Te Tari Taake) GST guidance. For margin analysis against product cost, use a tax-exclusive selling price; use a tax-inclusive figure only to check the GST-adjusted amount. Do not mix bases (Source: Inland Revenue (Te Tari Taake)).

If the tax-exclusive price is $100, the tax-inclusive calculation is $100 × 1.15 = $115; divide an inclusive figure by 1.15 to remove GST. Label spreadsheets and pricing tests “ex GST” or “incl GST”. Use the exclusive measure for product economics and the inclusive measure to check the GST-adjusted price basis. Verify the arithmetic with the product pricing calculator.

A business must register for GST if its turnover was at least $60,000 in the last 12 months or is expected to reach $60,000 in the next 12 months: see registering for GST. Record whether that threshold and registration status apply before setting the calculation basis, and confirm uncertainty with Inland Revenue (Source: Inland Revenue (Te Tari Taake)).

Show the price customers will see

Read the separate worked example from left to right. It starts with the item’s supported landed cost, then applies the required target margin to produce a price before GST. That step is not a markup shortcut: the margin is calculated as the share of selling price left after cost, so the target-margin price must be checked against the stated cost base.

The final line is the NZD customer price, the amount shown on your Shopify product page or shelf label after GST is added. Use that figure when checking customer-facing pricing, and the price before GST when checking whether the product meets its margin requirement. The product pricing calculator can help reproduce the same stages; keep each currency separate and label both prices clearly.

When a higher price is the wrong move

A higher price is the wrong move when the extra margin is outweighed by weaker demand. For illustration only, a 10% price rise with a 20% fall in units changes revenue to 1.10 × 0.80 = 0.88, or 12% less before considering fixed costs. Check conversion, units sold, basket size and repeat behaviour alongside product margin. A price that protects margin per unit but removes the product from customers’ baskets may reduce total contribution.

Act on the constraint you can evidence. If conversion drops while comparable products remain stable, test the price or review the offer rather than assuming the product needs a permanent increase. If basket size is weak, a useful pack, bundle or complementary assortment may work better. If stock is accumulating, review the range, pack size and promotion; if margin is poor at every credible price, revisit supplier terms, freight, packaging or product cost. ORVX can show product and collection profitability, contribution after advertising, inventory position and dead stock, and report where a price experiment is worth running. It cannot estimate price elasticity or predict the demand response, so treat the experiment as evidence gathering.

Build a pricing review routine

Review pricing monthly, and whenever supplier, freight, duty or packaging costs change. Update each product’s cost model, confirm whether comparisons are GST-inclusive or exclusive, and record each change’s date and source. Use the product pricing calculator before changing a live listing.

Compare three measures: list-price margin tests whether the ticket price fits cost and target; realised margin uses delivered-order revenue after discounts and refunds, showing what the product earned; contribution after advertising shows whether paid acquisition leaves enough after product economics. Use realised margin for routine pricing decisions, and contribution when advertising is a material sales cost.

Document the rule: raise price, reduce discounting or fix costs when realised margin is persistently below target; investigate when refunds or cost changes explain the gap; test rather than make a permanent change when demand response is uncertain. Record old and new prices, effective date, cost basis, discount rules, refund result and reason. Review bundles, clearance stock and unusually high-return products separately.

The article should leave merchants with a transparent pricing process: define the cost base, work backwards from the required margin, present the correct New Zealand price, and review the result when costs or trading conditions change.