Pricing a Handloom Stole Collection for a Festive Pop-Up
A final-year vocational student plans to sell 200 handloom cotton stoles at a two-day festive pop-up in Bhubaneswar. The weaver charges ₹180 per stole for fabric; dyeing costs ₹40, hand embroidery ₹90, packaging ₹15, and finishing labour ₹60. The student pays ₹6,000 for stall rent, ₹2,000 for lighting and display, and ₹1,000 for transport. The marketplace charges 12% commission on the selling price, and GST on handloom stoles is 5% included in the MRP. The student wants a net profit of at least ₹25,000 and expects 15% of stock to remain unsold; those stoles can be sold later at 30% off MRP. A friend suggests pricing at ₹599 and offering 'buy two, get 10% off'.
1. Calculate the full cost per stole and the minimum MRP needed to meet the profit target. Show how commission, GST and unsold stock affect the price.
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Variable cost per stole = fabric ₹180 + dyeing ₹40 + embroidery ₹90 + packaging ₹15 + finishing ₹60 = ₹385. Fixed cost = stall ₹6,000 + lighting/display ₹2,000 + transport ₹1,000 = ₹9,000. Total cost for 200 stoles = (200 × 385) + 9,000 = ₹77,000 + ₹9,000 = ₹86,000.
Target net profit = ₹25,000, so required net revenue = ₹86,000 + ₹25,000 = ₹111,000. Let MRP be P. Of 200 stoles, 170 sell at P and 30 sell at 0.7P. Gross sales = 170P + 21P = 191P. Commission is 12%, so net revenue = 0.88 × 191P = 168.08P. Set 168.08P = 111,000, giving P ≈ ₹660.
GST is already included in the MRP, so it is not deducted again. A practical MRP is ₹665–₹675 to allow for rounding and small losses. At ₹599, net revenue would be only ₹100,680 and profit ₹14,680.
2. Evaluate the friend's ₹599 price and the 'buy two, get 10% off' promotion. What price and promotion would you recommend?
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At ₹599, net revenue = 168.08 × 599 ≈ ₹100,680. Profit = ₹100,680 − ₹86,000 = ₹14,680, which is ₹10,320 below the target.
If all 170 full-price stoles were sold in pairs with 10% off, gross sales would be 170 × 0.9P + 30 × 0.7P = 153P + 21P = 174P. Net revenue = 0.88 × 174P = 153.12P. At P = ₹599, net revenue ≈ ₹91,719 and profit ≈ ₹5,719. Even if only half the stoles are promoted, the profit falls well below target.
Recommendation: price at ₹675. Do not run a blanket 'buy two, get 10% off'. Use a bundle only on slow-moving colours or as a last-day offer, and calculate the discount from the contribution, not from the MRP. A direct-sale or pre-order channel can also reduce the 12% commission.
3. Identify three risks in this plan and propose a control for each.
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First, unsold stock risk: 15% is assumed, but demand may be lower. Control by pre-selling at least 30% through social media or a pre-order deposit, and keep a small buffer of fast-moving colours rather than 200 identical stoles.
Second, commission and cash-flow risk: the marketplace may hold payment after the event. Control by confirming the settlement date in writing and keeping a cash reserve for the weaver and embroiderer.
Third, artisan and quality risk: hand embroidery may be delayed or vary between pieces. Control by approving a sample, setting a delivery date with a penalty clause, and inspecting before packing. A fourth risk is discount creep; control it by fixing a minimum acceptable price and refusing ad-hoc bargaining below that floor.