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On the Road Again: How Artists Can Maximize Live Merchandise Income

Jul 02, 2021
 

Now that artists are hitting the road again, it's the perfect time to focus on how to maximize their concert merch sales. I toured for five years and managed artists for ten years, so I know how essential merchandise sales are to an artist's viability. In the Managing & Booking Artists module of my book, How to Make a Living in the Music Business, I present a number of proven practices that can significantly increase your live concert merch sales.

Here's the video and text excerpt on this incredibly valuable topic...

III.C.14 What Are Some Keys to Profitable Tour Merchandising?

Just because an artist is selling something doesn’t mean that someone will buy it. And just because an artist likes a design doesn’t mean his or her audience will wear it.

Here are 13 keys to help you maximize merchandise sales and profitability while giving fans the best possible experience: 

  1. Create compelling designs.

Wearables such as shirts, hoodies, and caps need serious “wow” factor to compete with all the other disposable income options in the marketplace. An experienced merch designer is tuned into current fashion trends and color preferences and usually prepares several design “comps” from which to choose. Or, you or someone in the band can design your own. In either case, it’s not a bad idea to test new merch by posting two designs on the artist’s website and asking fans to vote for their favorite. We’ve also printed limited runs of shirts in different colors to see which one fans preferred. Be prepared to be surprised!

In addition to offering wearables with the band’s name and logo, consider designs with a provocative album title or an intriguing line from a song. People are drawn to “message” shirts, especially when an artist promotes a social justice cause or an “in your face” slogan.

  1. Insist on quality manufacturing.

Before ordering a lot of inventory on an item, get some samples and examine the quality of the pieces. Wash the sample shirts a half dozen times to see if they shrink or fade. Look closely at the printing to make sure the colors are “in register” and printed in the optimal location. Merch vendors buy “blank” shirts and caps in bulk from recognized textile companies, but bootleggers may tag blanks with respected logos and pass them off as first-line goods. Caveat emptor.

Artists and managers should strive to provide fans with quality merch they’ll enjoy wearing for years to come. After all, the consumer is paying the artist for the privilege of being a walking advertisement for their music! 

  1. Price the “sweet spot.”

Once you’ve created engaging merchandise, it’s important to find a price point that works for both the buyer and seller. If you’re going to sell ultra-expensive wearables (like embroidered leather tour jackets), make sure you’re also offering a number of affordable options so that fans don’t feel like they’re being gouged. Another way of effectively lowering prices is to “bundle” several items together so the customer pays less for each piece when they buy more items. For example, offer two $25 tee-shirts or three $15 CDs for $40. This gives fans incentive to buy more product and what you lose in margin, you’ll theoretically make up in volume.

  1. Understand Cost of Goods Sold (COGS).

Understanding the actual Cost of Goods Sold is essential to ordering and pricing product appropriately. COGS includes the per unit manufacturing expense as well as any design and shipping costs which are pro-rated across each piece of inventory. My rule of thumb is to aim for a product’s total COGS to be a third (or less) of the retail price you’re charging. Make every effort to avoid selling things for less than twice what you paid for them (unless you’re doing incredible volume, or the item is extremely expensive). For example, if the total COGS for a tee-shirt is $5, shoot for a minimum $15 retail price. If the shirt isn’t selling, consider marking it down to $10 or bundling it with something else that people want. If the COGS for a tee-shirt is $15, you may have a hard time getting $30 to $45 for the item, so think twice before ordering them—no matter how cool everyone thinks they look. 

  1. Consider hall fees, taxes, and commissions.

These expenses need to be factored in when setting the retail price for tour merchandise.

Larger mainstream venues often require artists and tours to pay the venue a percentage of their merch sales. This “hall fee” typically ranges from 10% to 30% of the gross sales and is negotiated by the booking agent. Hall fees can significantly jack up the retail price of merch. For example, a few years ago I paid $40 for a simple short-sleeve Billy Joel tee-shirt at his show at Madison Square Garden that cost less than $4 to manufacture—ostensibly because of high hall fees (and because they knew that someone who paid hundreds of dollars to see his show wouldn’t balk at $40 for a tee-shirt). Note: it’s entirely possible that merch might be priced differently at different venues according to each venue’s hall fee.

While local or state sales tax is calculated from the retail price of the merch, state and federal income taxes, however, are usually paid on the net income from the sales. That’s why it’s important to keep receipts and consider hiring an accountant acquainted with the music industry.

And finally, don’t forget that the artist manager, business manager, and possibly the entertainment attorney earns a commission from the artist’s merch sales. Because there are so many costs involved, merch income is often commissioned at a lower percentage than other artist income. Alternatively, full commissions might be paid on the net proceeds (but at a lower rate). All parties need to consider these factors as they negotiate commissions on merchandise sales.

  1. Display effectively. 

People shop the merch tables before the show, during intermission, and after the concert is over. Afterward, they’re usually in a hurry to get home, so if you don’t attract fans earlier, you may lose the sale. That’s why it’s essential for shopping to be as convenient as possible for purchasers.

Although it seems obvious, fans need to clearly view the available product. If shirts, caps, and CDs are spread flat on a table, only the people at the very front of the line can see what’s for sale. That’s why it’s essential for samples of the merchandise to be displayed at eye level and higher so consumers can see above the heads of the people in front of them. Clip-on spotlights and large signage should make all the products, sizes, prices, and “deals” clearly visible from a distance.

Ideally, people should be shopping while standing in line and then buying when they get to the front of the line. The goal is to make the line move quickly by streamlining and simplifying the process. 

  1. Limit purchase options.

Although it’s tempting to offer a wide variety of products, sizes, and colors, the goal is to get customers to shop while standing and to buy when they reach the front of the line. If the line gets too long or the people ahead of them take too long to purchase, there’s a strong chance those farther back in line will give up. The best way to mitigate this is to limit the purchase options to a few shirts, hoodies, and caps in a few colors. And rather than having stacks of shirts and CDs on the table, it’s more efficient to have inventory in plastic tubs beneath the table that the merch volunteer can hand to the buyer. This also cuts down on shoplifting (aka “shrinkage” in the retail trade).

When selling CDs (yes, people are still interested in buying them), it’s helpful to post a large image of each CD on the backdrop along with a short list of the songs from that album the artist performs in concert. That way, buyers won’t be picking up each CD and asking, “What album is this or that song on?”

Other novelties like posters, photos, and drumsticks are also popular. But again, less is more when it comes to maximizing merch.

  1. Train table volunteers.

In some cases, an artist or tour will set up multiple merch stations at strategic locations in the venue. Each display should look identical so fans won’t experience FOMO (fear of missing out) on some item.

Usually, the artist rider calls for the promoter to provide a prescribed number of merch table volunteers. They’re typically required to be at the venue 30 minutes before “doors open” so the merch manager or tour manager can train them.

By the way, giving each volunteer a shirt or cap of their choice to wear while they work is a great way to thank them in advance for their help as well as to create goodwill for months (or even years) to come! It’s also helpful to print merch table “cheat sheets” with answers to frequently asked questions. If the tour doesn’t have a person who can supervise each table, then one volunteer should be designated the “lead volunteer” and trusted with a zippered cash bag with sufficient “seed money” to make change for cash transactions. 

  1. Make transactions easy. 

I can’t emphasize enough how important it is to make transactions fast and easy.

If you decide to accept checks, then post a sign that says to whom the check should be made as well as any ID requirements. If you decide not to take checks, then post a highly visible sign (or two) that reads, “Sorry, we don’t accept checks, but we do accept debit cards, charge cards, and cash.” That way, people won’t be surprised or frustrated when they pull out their checkbooks to pay. Likewise, make sure the merch table volunteers are trained to use any handheld credit card/debit card machines and that there’s plenty of “seed money” from which to make change. Prices should be rounded up to include any sales tax due from the artist or tour. 

  1. Manage inventory accurately.

At the beginning of the tour, there should be an accurate inventory of every merch item by size and color. After each show, an updated count should be made of the remaining inventory using a preprinted worksheet or a computer app. The difference between the “count-in” and the “count-out” will be what was sold and given away that evening. After each show, the merch manager (or person responsible for merch sales) should tally all the credit/debit card receipts, checks, and cash (after subtracting the original “seed money”) to determine the total gross sales of merchandise that evening. Then, the merch manager should tally the number of units sold and multiply them by the average retail price to see how well this amount coincides with the gross sales number. Unless there’s a computerized or manual point of sale system that tracks individual units as well as “bundled sales,” there’s usually some difference between the two numbers. The issue is not whether they match to the penny, but whether there’s a reasonable correlation between the number of pieces sold and the amount of money collected. If not, there may be a problem with the technology or the table volunteers. There are several reasonably priced inventory management solutions available, so a little online research would be well worth your while.

Because it’s risky to carry a lot of cash, the merch manager should secure the revenue in a safe on the bus and deposit the funds in the bank as soon as it’s convenient. You can’t be too vigilant with merch money. I’ve heard of bags containing thousands of dollars mysteriously disappearing when heads were turned for just a moment.

  1. Reorder wisely.

It’s not enough to just count in and count out the merch inventory every night. The merch manager also needs to monitor what’s selling and what’s not and anticipate how much product needs to be reordered before the current stock is depleted but with sufficient time to avoid rush fees. Many merchandising companies can print and deliver a normal order within a week to ten days. While you don’t want to lose a sale on a hot-selling piece of merch, you also don’t want to chew up your profit margin in rush fees and expedited shipping costs. And ideally, as the tour nears the end of its run, it’s desirable for merch levels to be fairly depleted so the artist isn’t carrying inventory on the books that are waiting to be sold.

  1. Purge overstock.

Every piece of unsold merchandise represents money you can’t access. It’s tempting to look at 100 slow-moving shirts for which you paid $5 apiece and think, “If I’m patient, I can sell these for $15 apiece and generate $1500 in income.” But if the shirt’s a dud, all you’re really doing is keeping $500 worth of inventory on the shelf that might not ever sell. Notwithstanding the fact that it’s taking up space in a warehouse that someone’s paying for, keeping low-demand product on hand is like making the same bad buying decision day after day.

In business jargon, these are called “sunk costs”—well-meant expenses that probably won’t ever be recovered. Business experts advise against making decisions that involve “throwing good money after bad.” Rather, with excess, low-demand inventory, it makes better business sense to use the shirts as an incentive to increase sales in another area. For example, if your average merch transaction is $30, then you might make an announcement from the stage (or online) that every purchase of $40 or more will receive a free tee-shirt worth $20. This strategy is a three-fold win: it increases the average merch transaction, the additional income pays for the bonus shirt, and it clears excess inventory from storage. 

  1. Offer all merch online.

When all of an artist’s tour merchandise is available on its online store, this gives customers another buying option as well as helps if an item is temporarily unavailable on tour. The artist and manager can handle fulfillment of fan orders in-house or hire a third-party merch store like www.missingink.com to stock inventory and fulfill orders directly. Online merch companies are basically retailers and charge a significant percentage of the sale for their services.

Merchandise sales can make a significant contribution to an artist’s income. As such, an artist’s team needs to make selling merch as important a priority as getting dates and creating music.

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