Rich Thompson, CEO of Aeoon North America, offers advice on setting the right price for your DTG services
The best way for a decorator to maximise their DTG operation in terms of profitability is to first truly understand the total cost of ownership of their system. Whether they purchase entry-level machines for tens of thousands or for hundreds of thousands of pounds, they need to assess their consumable usage and, above all, the uptime of their respective system. The decorator must assess the output over an extended period to find the sweet spot for pricing accurately.
The sweet spot is when the quantity hits a number where the set-up of colours on a screen press would take longer than producing the job – typically four colours and above. This varies depending on the machine because it is based on cost per print and speed of printing. For example, our Kyo 12-3 can do 140 full-colour full-chest prints per hour. If an order comes in for a four-to-six colour job, it would take a screen printer one hour to one hour and thirty minutes to set up, so if the order is under 200 shirts it would make more sense to do it digitally.
The same doesn’t necessarily hold true for other DTG machines out there. Our closest competitor’s comparable unit in price offers approximately 65 prints per hour of the same size and scope. So, in the same scenario it would make more sense for the screen printer to set up for a 200-piece, four-to-six colour order and only run DTG for 100 shirts and below.
B2B versus B2C
The screen printing pricing model has always been based first on colour – one, two, three or four – and then quantity. With DTG, colour no longer needs to be an inhibitor, but instead something to differentiate and offer as a value-added service for a minimal upcharge. So, the ten-thousand-dollar question is, how to price DTG services accordingly? The answer is it depends on your target market.
For contract decorators, pricing DTG will be a little more difficult because the market served is the mature ‘colour/quantity’ business-to-business market. There is an opportunity to make considerably more margin by training your customer base to simply ask for quantity and take colour out of the equation, which will make it naturally increase. Graphic designers will then be able to push a design in terms of creativity and colour and leave the black and white days behind them. It is then incumbent on the decorator not to leave money on the table and price accordingly.
In many cases, full-colour DTG prints have been priced in the area of six-to-eight colour screen print jobs at quantities of multiple cases of shirts. This is because DTG is still a new and growing market and the early adapters didn’t price it based on what the market would accept, but rather at the same rate as their highest decorating prices. This goes back to the B2B market maturity and decorators not being able to successfully change the thought process of the promotional goods distributors. On the business-to-consumer (B2C) side, they had retail to help set the prices at a much higher level. The online transition has helped decorators get more designs out, offer faster lead times and make more margin.
The B2C decorators have a lot more flexibility because of the short-run, graphic-intensive designs. This business is truly market-driven and has new entrants every day. This group needs to focus on more output in the same footprint of machinery and the highest quality print to differentiate from competition, which is Aeoon’s strength. Highly intricate, full-colour, unique designs are what drives this market. True marketing and operational efficiency are drivers that must be considered to maintain and maximise profitability while creating a happy, returning customer base.
Calculate your costs
The best tool to calculate an average price is labour units needed to produce a product and the consumable usage per design. The RIP software in all Aeoon machines gives the user a calculation after the artwork is processed to help you to understand how much consumable is needed to produce the required print. In DTG, the most expensive consumable is the ink so finding the right system that offers the lowest cost per print is a major component. Profit margin will vary by the size and scope of the decorator and what customer base they are serving, but they should be aiming to find jobs that maximise their resources and keep their machines busy. Typically, in the DTG world, more can be charged for short runs and in order to maximise profits a system with the lowest cost per print will reap the most profit. On- line and printed line [rate] cards are for reference and for shopping customers. Repeat and larger orders will deliver lower margins, but they will utilise more of the overall burden rate of the entire facility so they should be costed on a contribution margin basis.
The bottom line
Value added services like folding and bagging options are dependent on the markets served. If a decorator is serving a retail customer who will put the items on display, a crisp looking package is needed. If it is a contract decorator, typically shirts are delivered in bulk and packaging is not as important. If multiple labour resources can be running more production which will drive revenue versus packaging, automation makes sense. The goal with all automation is to have as short a return on investment as possible. The labour pool is very tight and getting the most product out the door economically is what will drive profit, either with human capital or capital equipment.
The bottom line with DTG is identifying the most reliable machine that delivers a cost per print that meets your specific business’s profitability requirements. Buying an entry level system because of the initial lower cost isn’t necessarily the best way to maximise profitability. The market is migrating to digital and this cycle will continue for several years and those who adapt the fastest will reap the most benefit. Be sure to do your homework and envision your business five years from now because that is what your competitors are doing.