Make Money with Merch in Four Easy Steps—Tips for Choosing Your Product Without Losing MoneyBy -
Estimated reading time: 11 minutes
With digital music sales declining and music streaming robbing artists of yet another income opportunity, one of the few remaining viable revenue sources for indie musicians is a merch table.
I know. It doesn’t sound thrilling, and it carries nothing close to the rush of performing on stage. You’re an artist and performer, not a product pitch person. But, if you want a sustainable music career and not just an expensive hobby, you’ve got to learn to sell merch. It’s harsh, but true.
Think about the musicians you admire, the big artists who have already “made it”. When was the last time you went to their concert and didn’t see merchandise for sale? Never, right? That’s because these major artists understand the importance of selling merchandise. They rely on that extra income. When done correctly, it’s entirely possible that their profit from merch sales far outweighs their cut from ticket sales. If merch sales are so crucial to the success of these big artists, why would you shrink away from adopting the concept for your own career?
You shouldn’t. It’s time to stop making excuses and start making some choices. The longer you procrastinate, the more income you risk losing. Take some time today—now, even—to figure out what merchandise works best for your band and your fans.
Unless you are bringing in big money without merch sales and don’t need any extra, read on.
Choosing Your Merchandise
Let’s start by talking about the merch itself. Selling merch does require an investment, and choosing the wrong items—those that don’t end up selling—can result in money lost. Since your goal is to increase your income, that’s an especially frustrating and disappointing result.
You might be tempted to jump out and make large purchases of product to place on your merch table only to find that you missed the mark. Or, you might be so afraid of winding up with 700 CDs (or stickers, or shirts) left over in your closet that you haven’t ordered anything. Neither is a good place to be.
The following four tips can help remove some of the mystery when ordering merch and, hopefully, prevent you from making mistakes.
Popularity. Some items—your music on CDs or t-shirts with your artwork on them—are obvious choices, but others aren’t so clear. Ask yourself what your fans want to buy. If you’re out of touch with your fans or haven’t been selling merch, it might be difficult to answer this question. You can start by talking to or observing other artists in your genre or area who are already selling merch. What products are they offering, and what are people picking up and buying? Also find out what hasn’t worked.
Once you find a winner, stick with it; don’t tinker too much with perfection. If an item is a loser, dump it. Replace badly performing product with new choices. Don’t allow your merch table look empty and unexciting.
Quantity: how much should you buy to start? Once you’ve decided on a product to offer, how much should you buy up front? While it’s okay to be optimistic and hope for big sales, it is wise to test the market first. This might mean paying a higher per-piece price at first, but that’s better than a low per-piece price on a large order of product that doesn’t sell.
For example: you decide to sell a beer mug with your logo on it and think you can get $8 each on your merch table. If you buy 500 mugs, your cost is $3 per mug, which means your profit would be $5 per mug. Sounds good… if all the mugs sell. Or, you might decide to test the market and buy only 10 mugs, but then your cost jumps to $10 per mug. This means you lose $2 every time you sell a mug for $8. What should you do? Start with 10 mugs. While you do not want to be in the business of losing money, a $100 loss for 10 unsold mugs is nothing compared to a $1,500 loss for 500 unsold mugs.
It might cost a little more up front, but applying this practice to all new merch products will save you big money in the long run.
Price point and margin. These two items work hand in hand. Price point is the amount you charge your fans for the product, and margin is the amount of gross profit you make from the sale. For example: if your t-shirts cost you $7 each, and you sell them for $15 each, then your margin would be $8 each. This represents a reasonable margin of 53%.
Only two things really matter here: how much you have to spend to purchase the merch, and how much income the merch generates. The less you have to spend to generate a large income, the better. Spending ties up money and that money is at risk. Keeping your costs low is important. However, you don’t want to sacrifice quality on product or price things far higher than their actual value. Merchandise that falls apart or looks cheap probably won’t sell well, especially if it’s priced like high-quality merchandise.
A good merch decision has a low cost and a high sales price. If you can invest a small amount and still have the potential of high margins, then the item is a home run. The most obvious example of this for the indie musician is a CD in custom packaging.
Here’s an example: You purchase 200 duplicated CDs in 6-Panel Digipaks with overwrap. Your cost after shipping and handling is a total of $442. The per-piece price is $2.21. Now, a typical sales price for this type of CD is $12 – $15 dollars. If I use $12 (the low end) in my example, your margin is $9.79, or 81%. This is a great margin! You have to sell just 25% of your product to recoup your entire investment.
A bad merch decision involves high cost and low margins. For example, spending $25 each on products you can only sell for $35. Yes, you might make $10 on each sale, but you tied up (risked) $25 to make $10. This is not a good strategy. Products with a higher cost don’t allow you as much room to adjust the pricing if it doesn’t sell well; on the above item, you can only discount the price $10 before you start losing money on each sale. You also have to sell a greater quantity (71% of your order) just to break even on your investment.
Remember this important tip when choosing products to sell: Pick products that require a small initial investment, have great margin, and don’t require you to purchase huge quantities to make the numbers work.
Turns. This is a retail term that describes how often you sell out of your stock of an item and have to buy more. If a product has a high turn rate, it is selling well, and your initial investment is being recovered quickly.
A target turn rate for an independent musician might be between 4-6 turns per year. That means you limit your purchase of a product to the amount you will sell in 2-3 months—no more.
Products that do not turn well might sit on your merch table for 6-12+ months, becoming “worn and tired”. Put a sale price on these products, and get rid of them. Try to get your original investment back, if possible.
In the clothing industry, turn means everything. If a store can’t sell its entire inventory by the end of a season, it dumps the clothing at about 10% of the original price just to move it out of the store. Otherwise, the buildup of out-of-season and last year’s fashion means a waste of their customers’ time and a decrease in customer traffic.
The same principle applies to musicians and merch. Don’t let your merch become worn, and don’t buy more product than you can sell in three months.
Poor turn ratios of merchandise cause more businesses to fail than any other single item.
A Few Points About Your Table
It’s important to have a merch table that looks good with product clearly displayed for sale. Simply throwing it out on a table isn’t going to impress your fans. Consider a table covering and skirt. If possible, add nice displays; custom-printed corrugated displays are cheaper than you think.
Mention the products and your merch table in a tasteful way while you are performing. Offer to sign anything purchased that evening, or—if business is unusually slow—offer to give something away.
Make sure your table is manned the entire time you are in the venue. This means when the doors open, while all acts are playing, and as people head out. Being personally present at your table is also advisable.
Above all else, capture names and email addresses from everyone who purchases your product (and, if you can, those who don’t). These fans represent your best opportunity to sell more products in the future.
Do not treat merch as an afterthought. If you aren’t behind your own merch, what makes you think your fans will be?
Real Examples on How to Not Sell Merch
I just got back from a short trip. We stayed in a wonderful little resort town, and I had the opportunity to listen to some live music—two talented and entertaining acts at two different venues—while I was there. The crowds weren’t huge—sixty-five people at one venue, and 120 at the other—and, like me, most people were visiting the area and hadn’t heard of the musicians. However, quick glances around the room indicated that everyone was enjoying the performances.
This is a prime situation to sell merchandise. You have captive audiences who are clearly enjoying your work and who haven’t likely purchased your product before. Additionally, based on the setting, the audience could afford to spend a little money on something to help them remember their evening or trip. A tastefully displayed quality product would have been a hit.
Yet, neither musician had any merch displayed.
During breaks in the shows, I approached the musicians to compliment them on their performances, and I asked if they had any music for sale. Both musicians dug around in a bag before producing a couple of CDs. The packaging was very basic: a slim line jewel case without any printed material. Both artists priced their music at $25 per disc, or all three discs for $50. The packaging and lack of display suggested that the artists did not think much of their own music, while the high prices said otherwise.
While I bought CDs from each artist, no one else did. Either the audience didn’t realize there was product available, or they were put off by the high price for a poorly presented product. Had the artists offered quality product on a nice display, they might have made several hundred dollars in merch sales that night.
Super Fans Make For Super Profits
Untapped audiences, like those in the above anecdote, are a nice find, but they aren’t your main targets for merchandise sales. Instead, you should focus on selling to your existing fans, especially your “super fans”. Super fans like and support almost everything you do, and this includes buying your merchandise.
Knowing this, try to set goals. If you want your super fans to purchase $100 of product a year, do you have enough new high-quality merchandise available to reach that goal? If not, it’s time to make some changes.
This might mean that you need to focus on releasing new music to sell. Fans love new music; if it has been a while since your last release, odds are good that your fans are more than ready.
An artist friend of mine just released a new album and sold 350 CDs at just three shows. He made more money on this new release in one week than he made in the last 12 months on merch sales. He already recouped his entire investment in the CDs, plus some. The best news is that his new release continues to sell, and he still has product available. You should also know that this happened after he confided in me that he thought his fans were “worn out” on his music. He could not have been more wrong.
If you’re wanting to establish a long-term, sustainable career as a musician, it’s time to accept the fact that selling merch is in your future. Do it well, though, and it will be more than worth your time and effort.