June 18, 2025

When I started this company, I knew very little about e-commerce and almost nothing about retail (and that’s putting it generously). Thankfully, I had the financial backing to make a few mistakes, learn from them, and adjust as I pressed forward. I’ve taken a “learn as you go” approach from the beginning, and I’m still learning. It’s been incredibly rewarding, but not without its challenges.

One of those early lessons? Figuring out how to price a product. I’ll admit, I had to Google how to calculate MSRP. The standard approach is to add up the full Cost of Goods Manufactured (COGM) - parts, packaging, shipping materials, labor, and so on. I try to keep that number as low as possible by ordering components and supplies in bulk. For example, our custom shipping boxes cost significantly less when I order 2,000 instead of 500 at a time. Same goes for plugs, heat shrink, and other components. The tradeoff, of course, is the upfront capital expenditure.

When you’re selling direct-to-consumer (DTC), pricing is relatively straightforward: you take your COGM and add a reasonable margin. Market demand, competition, and brand positioning all play a role, but there’s more flexibility because you’re not involving a third party. Without a distributor or retailer in the middle, you can keep your price lower and still be profitable. There are trade offs with DTC, of course - the biggest being that you are operating in somewhat of a silo and it requires significant advertising investments to get your products and brand in front of customers.

But selling wholesale - especially to independent guitar shops - has been a wake-up call. That’s where things get tricky. Instead of basing price on COGM + margin = retail, you now have to determine a wholesale price that still allows the retailer to make their margin. And their margin might be a lot higher than you expected.

Here’s the formula retailers use:
‍(MSRP - Wholesale Price) / MSRP = Retailer’s Profit Margin (%)

If you’re an established brand, you can usually dictate that margin - typically around 30%. But if you’re a small business trying to get your foot in the door, the retailer often tells you what margin they need to make it worth their while. And it’s often more than 30%. I once had a store tell me they wanted a 75% margin to carry our cables.

Let’s play out that scenario. Say I somehow get my COGM down to $30 for a 10-foot cable (spoiler: it’s actually a lot higher). A standard wholesale price might be $45 - a 50% markup, which gives me a $15 profit. That's not ideal, but manageable in volume – especially if the store helps improves your brand awareness with consumers.

But if the store wants a 75% margin, the MSRP would have to be $180 at a $45 wholesale price. If I lowered the wholesale price to $35, the MSRP would be $140, which gives the store a $105 profit on the sale and leaves me with…$5.

Even at 50%-60% margin, the numbers still don’t make sense for us - or for our customers.

Now, large manufacturers can absorb lower margins because they produce at scale. Volume makes up for it. That’s not us. Our cables are soldered by hand, one at a time, with care and precision - by me. We’re a small operation, focused on quality, not quantity.

The prices we've had on our site have a slim buffer - typically $5 to $8 over our COGM - so that we can sell to retailers if the opportunity is right. But we’ve always built our cables with carefully thought-out designs, premium components, and meticulous attention to detail. Using cheaper parts and materials to lower our COGM, or building faster, is a simply a non-starter.

As Apple’s SVP of Marketing Greg Joswiak once said about the idea of introducing lower priced Mac computers, “We don’t do cheap.”

We don't either.

However, starting today, we’re changing our pricing structure to better reflect our all-in direct-to-consumer model. This shift will help us continue offering high-quality cables at better prices - and let us grow in a way that stays true to who we are.

It’s better for our customers. It’s better for our business. And it’s the right move for where we’re headed next.