The fundamental mistake: setting prices based solely on the cost of the product
The vast majority of fashion brands starting out in e-commerce price their products in a simplistic way: they take the cost of the item, apply a markup of 2x or 3x, and that’s it. If the blouse cost R$ 40 to produce, it sells for R$ 120. It looks like the margin is 66%. In practice, when you add up all the costs involved in an online sale, that margin can easily drop to 15%—or less.
The problem is that the product cost is only part of the equation. In e-commerce, there are layers of costs that don’t exist in a physical store—and if they aren’t accounted for in pricing, they will silently erode the business’s profitability until it’s too late.
At WX3, one of the first steps when a new brand enters the ecosystem is a comprehensive pricing assessment. In over 80% of cases, we find that the brand is selling with a significantly lower actual margin than it realizes—and in some cases, is literally losing money on certain products without knowing it.
The true cost of an online sale: the complete formula
To price correctly in fashion e-commerce, you need to consider all costs involved, not just the product cost:
1. Product Cost (CMV)
This is the cost of acquiring or producing the item. It includes: raw materials, production labor, finishing, labeling, and primary packaging. For brands that purchase from suppliers, this is the purchase price. For those who produce in-house, it is more complex and often underestimated.
2. Shipping cost
The average amount you spend to ship the product to the customer. Even if you charge the customer for shipping, you need to account for: subsidized shipping (when you offer free shipping over X), the difference between what you charge and what you pay (if you charge $15 but the actual cost is $22), and shipping for returns and exchanges (remember: 15–30% of fashion orders are exchanged).
3. Payment gateway costs
Every online payment has a cost. Credit card: 3.5% to 5% of the sale amount (depending on the number of installments). PIX: 0.5% to 1%. Boleto: R$ 3 to R$ 5 per cleared boleto (and 30–40% of boletos go unpaid). If 70% of sales are made by credit card with an average of 4 installments, your effective gateway cost is around 4.5% of revenue.
4. Taxes
Depends on the tax regime. Simples Nacional: 6% to 15.5% of revenue (depending on the bracket). Presumed Profit: IRPJ + CSLL + PIS + COFINS total between 11% and 16%. ICMS: varies by state and can range from 7% to 18% depending on origin and destination. Consult your accountant, but don’t ignore this cost when setting prices—it’s the most expensive mistake you can make.
5. Marketing Costs
In e-commerce, marketing is a direct sales cost, not an overhead. Every sale has a customer acquisition cost (CAC) that needs to be accounted for. If you invest R$ 20,000 in paid media and generate R$ 100,000 in sales, your marketing cost is 20% of revenue. Add the cost of tools (email marketing, CRM, analytics) and the cost of staff or an agency.
6. Operating Costs
E-commerce platform, packaging, customer service team, inventory, warehousing. These costs are often classified as “fixed” and ignored in product pricing—which is a serious mistake. Divide your monthly fixed costs by the number of orders to determine the operating cost per order.
The realistic markup formula
With all costs mapped out, the markup formula is:
Selling Price = Product Cost / (1 - Sum of all cost percentages - Desired profit margin)
Practical example for a blouse with a cost of R$ 40:
- Average shipping: 8% (already accounting for free shipping and returns)
- Payment gateway: 4.5%
- Taxes: 12% (Simples Nacional)
- Marketing: 18%
- Operations: 7%
- Desired profit margin: 15%
- Total percentage costs: 64.5%
Price = R$ 40 / (1 - 0.645) = R$ 40 / 0.355 = R$ 112.68
Rounding to R$ 119.90 (psychological pricing), the actual profit margin is around 17%—quite different from the 66% that seemed to exist in the simple 3x markup.
WX3 consultants perform this detailed exercise in every diagnostic session, mapping each product to identify which catalog items are actually profitable and which are operating at a loss.
Psychological pricing: the science behind prices
After calculating the base price with a healthy margin, apply psychological pricing techniques to maximize conversion:
1. Prices ending in 9 or 7
R$ 119.90 sells significantly more than R$ 120.00 — even though the difference is only R$ 0.10. In fashion e-commerce, prices ending in 9 (R$ 89, R$ 149, R$ 199) and in 7 (R$ 97, R$ 147, R$ 197) perform best in A/B tests.
2. Price anchoring
Showing the “from” price and the “for” price works because the brain uses the first number as a reference. R$ 249.90 for R$ 179.90 sounds much better than simply R$ 179.90—even if the product has never actually been sold for R$ 249.90. Use this technique ethically: the “from” price must have actually been charged for a reasonable period of time.
3. Highlighting installment pricing
In Brazil, displaying “6x R$ 29.98” may convert better than displaying R$ 179.90. Test both approaches—the result varies by price range and audience profile.
4. Pricing by category
Maintain consistent price ranges by category. If most of your brand’s blouses are between R$ 89 and R$ 149, a blouse priced at R$ 249 will seem too expensive—even if its production cost justifies it. Customers compare prices using their own references within the brand.
5. Fixed-amount discount vs. percentage discount
For products under R$ 100, a percentage discount seems larger (20% OFF). For products over R$ 100, a fixed-amount discount seems larger (R$ 50 OFF). Adapt your messaging according to the price range.
Pricing strategies for different objectives
To clear out inventory from past collections
Use progressive discounts: 20% in the first week, 30% in the second, 40% in the third, up to 50–60% at the limit. Start with a moderate discount to attract those willing to pay more and increase it gradually. Set a floor: never sell below the product cost + shipping + payment gateway fees, even during a clearance sale.
To launch a new collection
Consider a pre-launch strategy with special pricing for early buyers or the VIP list. This creates a sense of urgency, rewards loyal customers, and generates initial sales data that helps adjust prices and inventory.
To increase the average order value
Use bundles (buy 2, get 3) and progressive discounts (10% off the second item, 15% off the third). These strategies increase the order value without reducing the unit price—and often improve the total margin because they spread fixed costs (shipping, packaging, operations) across more items.
Margin by channel: where to focus your efforts
Not every sales channel has the same profitability. Consider the typical margins:
- Own store (organic + email): Highest margin. No paid media costs, no marketplace commission. Invest in SEO and email list building.
- Own store (paid traffic): Intermediate margin. Acquisition costs eat into part of the margin, but the customer is yours for future engagement.
- Marketplaces: Lowest margin. Commissions of 15% to 25% + subsidized shipping + fierce price competition. Use marketplaces for volume and acquisition, but not as your primary channel.
- Social commerce: Variable margin. It can be very good when it generates organic sales, or average when it depends on paid social media advertising.
At WX3, we analyze profitability by channel for each brand we serve and direct investments toward where the margin is healthiest—always with a focus on sustainable growth, not just volume.
Common pricing mistakes that destroy margins
- Not accounting for returns: If 20% of orders are exchanged or returned, the cost of return shipping must be factored into pricing.
- Ignoring the cost of installment plans: Selling in 10 interest-free installments “costs” more than a cash sale. The upfront cost of receivables or the financial cost of tied-up capital must be factored in.
- Pricing the same across all channels: If the marketplace charges a 20% commission, the price there needs to be adjusted—or the product needs to be different from what you sell in your own store.
- Copying a competitor’s price: You don’t know the competitor’s cost structure. They might be operating at zero margin to gain market share, or they might have lower costs than you. Price based on YOUR reality.
- Never adjust prices: Costs change (suppliers, shipping, taxes). Review prices quarterly and adjust without hesitation—as long as you communicate the change.
Conclusion: Pricing isn’t a gut feeling; it’s a science
Pricing in fashion e-commerce isn’t simply applying a multiplier to the product cost. It’s an exercise that requires detailed knowledge of all involved costs, an understanding of consumer psychology, a strategic view of channels, and the discipline to review prices regularly.
At WX3, pricing is treated as a strategic pillar—and it’s one of the most frequent topics in consulting sessions with the brands we serve. The difference between a brand that grows profitably and one that grows while frequently accumulating losses often lies in a well-crafted pricing spreadsheet.
If you’ve never sat down to calculate the actual cost of each sale—including shipping, payment processing fees, taxes, marketing, and operations—do so before pursuing any other optimizations. It may be that the greatest opportunity for profit in your e-commerce business isn’t in selling more, but in pricing better.