Why Cosmetics Are Priced by SKU, Not Order Total (Tiered Pricing Explained)
Here's a question we get all the time: "If I order 1,000 units each of 10 products, why don't I get the price for 10,000 units?" Because cosmetics are priced by SKU, not by order total. Here's why.
Every SKU is its own batch
When a product is made, it's compounded in what we call a kettle. Every shade, and every SKU, has to go in its own kettle. Each kettle has to be set up, overseen by a compounder while the product is made, and cleaned out afterward. That takes hours for each color. Some shades also go individually through the roller mill.
Those steps happen the same way whether the batch is a minimum-size run of a few kilos or a 200-kilo batch that yields 10,000 units.
The math on 10 SKUs vs. 1
If you order 1,000 units of 10 different colors, we are:
- Setting up the kettle 10 times
- Manufacturing 10 separate batches, each overseen by a compounder
- Cleaning out the kettle 10 times
- Setting up and cleaning the filling machine 10 times
- Running the filling line 10 separate times
Order 10,000 units of one item, and all of that happens once. It's significantly cheaper to make 10,000 units of one SKU than 1,000 units each of 10 SKUs.
Enter: tiered pricing
If you've gotten a quote from a manufacturer, you've probably seen tiered pricing: one price at 1,000 units, a lower price at 5,000, and lower again at 10,000. The amortization of labor explained above is one reason tiered pricing works. There's a lot more that goes into it, though, and there are other levers we can pull when you order a single SKU in larger volume.
What this means for your launch
If budget is tight, a smaller collection with more units per SKU will usually get you a better per-unit price than a big collection with fewer units of each. Most Lady Burd private label products land between $3 and $15 per unit, depending on your tier and your bill of materials.
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