Editor's Note: This articles appears in the Spring 2026 issue of The Costumer magazine. This is just one of several useful articles that you'll find in that issue. The digital version of the Spring edition was sent to members last week, and the paper version is now in the mail. Members can access this issue in the Member Portal.
By Ed Avis
When Jim Berg sets the prices for items at his store, Twin Cities Magic & Costume in Minneapolis, he starts with a rather simple approach: He puts himself into the buyer’s shoes and guesses what they would consider a good price for each item.
“I say to myself, ‘If I was the shopper, what would I pay for it?’” Berg says. “So if I would pay $20 for it, I think anybody would pay $20 for it, because I’m a very frugal shopper.”
Berg’s pricing strategy differs from the standard price-setting methods, such as “keystoning” (doubling the wholesale price) or basing the price on competitors’ prices. But his approach, which makes customers feel like they’re getting a good value while still maintaining profit, positions Twin Cities Magic & Costume for long-term success.
“Today pricing is not only a financial decision but also a positioning strategy,” says Mariia Golitsyna, a business marketing and commercial growth strategist. “Retailers who succeed usually focus on communicating their value rather than competing only on price. When companies clearly understand what customers are willing to pay for — whether it’s quality, convenience, brand perception, or experience — they can protect margins while staying competitive.”
Berg has been setting prices at his store for nearly 40 years, so he can tap into a lot of experience when he’s guessing what people will think about his prices. But even if you don’t have the same depth of knowledge, here are some tips from him and others on how to create prices that can protect your margin and keep customers coming back.
Know the Floor and the Ceiling
Before you set the price for a product, make sure you understand your true break-even for that item. Obviously that includes the wholesale cost of the item, but also some overhead and related costs, such as potential shrinkage, carrying costs (interest on debt), and staff costs.
“If you don’t know your floor, you’re guessing,” notes Laviet Joaquin, head of marketing for a home technology retailer. “And guessing erodes profit.”
That first calculation – what your “floor” is – should happen before you buy the item in the first place, of course. You don’t want to be making pricing decisions after something is already in your inventory, because you may have to set prices higher than your market will bear.
Next, remember Berg’s practice and consider the perceived value of the item. Sometimes perceived value includes urgency – on October 30 a good Halloween costume has a higher perceived value than it does on November 1. Other times perceived value includes trendiness – if all the kids want to wear sparkly eye shadow, you can probably set the price higher for sparkly eye shadow.
Other characteristics that affect perceived value are packaging (people pay more for something that is packaged attractively) and advertising (when consumers see ads, they perceive that the product being advertised must be worthy of the investment in advertising).
By keeping your eye on those two ends of the spectrum -- your breakeven at the bottom and the perceived value at the top -- you should be able to set prices that bring in more profit than if you used a less-nuanced price strategy.
Other Considerations
Within the window of breakeven and perceived value, there is room to make adjustments that increase profit.
For example, keep in mind that some items in your store drive traffic, while others drive profit.
“Some items are easily adjustable in their pricing structures because they are high-volume traffic items,” says Stephen O’Farrell, owner of Tricks & Treats and The Christmas Loft in North Comstock, New Hampshire. “Profit, though, comes from secondary items that are added to a purchase beyond the primary item that drove traffic.”
An example of O’Farrell’s idea might be setting a lower price on a basic Batman costume, because it’s in demand and you bought enough of them to get a decent price, but a higher price on the common accessories, such as the Batman accessory belt or higher-end mask. The costume initiates the purchase, while the accessories increase the profit.
Sometimes you can earn more overall profit by bundling a selection of items in one package rather than trying to sell them separately, even if the margin is a little lower on the bundle.
For example, let’s say customers want something to wear to the Pride Parade. If someone buys a rainbow-colored wig at $15, a glitter make-up kit for $20, and a tie-dyed t-shirt for $25, the sale will be $60 and at your normal margin of 50 percent, you’ll earn $30. But only one in 10 buyers makes that combo purchase – the rest just buy the wig and you earn only $7.50 per, giving you a total profit for those 10 buyers of $97.50. Now put those three items in a bundle and price it at $50. You’ll only earn $20 profit for the bundle, but if five of the buyers go for the bundle and five buy just a wig, your profit from that group of shoppers will jump to $137.50.
Finally, consider the experience factor: If you have a cool store that is beautifully decorated and offers a true “experience,” you probably can charge more – at least for certain items – than your competition at the ugly big box store. People who are in a fun mood and enjoying themselves are more apt to open their wallets.
When Should You Discount?
O’Farrell says he starts thinking about discounts even before he buys inventory. Obviously he hopes everything will sell out, but if he purchases wisely, he has enough margin at the end of the season to discount products but still make money.
Berg has a slightly different approach. He does not discount – instead, after Halloween, he moves the unsold costumes to a different location in the store and sometimes even increases the price to emphasize the quality of the merchandise.
“We try to price everything fairly to begin with so that we don’t have to mark things down,” he explains. “It’s not like a sale a Macy’s – I don’t mark something up double so that I can cut it in half for a sale.”
Ultimately, how you set your prices affects customers’ perception of your store. If you want customers to feel that your store carries quality merchandise and offers an enjoyable shopping experience, don’t worry if your prices are somewhat higher than those at mass retailers.
“Pricing teaches customers how to value your store,” Joaquin notes. “Teach them carefully.”