Adjusting Your Business Model for DTG

Overcoming the challenges of direct-to-garment printing.

Digital printing should be a familiar concept for garment decorators. The jury is still out on whether direct-to-garment (DTG) and other digital methods will one day replace screen printing, but what’s certain is that DTG offers certain benefits that aren’t achievable or practical in the analog world.

As a screen printer, you’ll have lots of jobs come to you that just don’t make sense to even quote without a digital technology. As Terry Combs, an experienced friend of mine, often says, “You cannot charge enough money for a six-color print where the customer wants less than 12 shirts.” DTG can be perfect for screen printers who have to do a lot of proofing for their clients. DTG is also perfect for printers with storefronts so they can offer on-demand prints or even personalization of a preprinted line of shirts.

Whether you’re adding DTG to complement your analog production or you’re going fully digital, it’s important to approach some aspects of your business differently. I’ll outline some of those possible challenges here. 

Unique Marketing Strategies

DTG will give you new decorating abilities, so it’s important to start fresh with your marketing strategies to get the most out of your new technology. Let’s start with two ways you may have marketed yourself as a screen printer that will not work, and what you can do instead as a digital decorator. 

The first thing to stop doing is publishing a price list. It’s time to throw out that nice little grid showing the number of colors across the top and number of shirts down the left. Also eliminate your excessive list of additional charges – artwork charges, screen charges, color charges, screen recall charges, and so on. You should give your customer a turnkey package focused on fulfilling their needs, with no additional fees. Give them a price for a unique, personalized experience, like attending Disney World as a family in neon pink shirts with each person’s name on them. How about starting a program with a local BMW dealership that provides every new satisfied owner with a personalized shirt? To be a successful digital decorator, take yourself and all that goes into making the shirt out of the selling proposition, and put yourself in your customer’s shoes to imagine their needs.

The second thing to avoid is the “Cheap Shirt Sale,” “3 for 3 Special,” or any other variation of that plan. At their core, these promotions are just a way to get the easiest jobs into a screen printing shop. On the digital side of your business, you want to avoid those one-color, black-on-white jobs that often scream “generic and thoughtless.” Your cost to produce that shirt is the same as producing a 16 million-color masterpiece on a white shirt, but you cannot charge the same price because of perceived value. Instead, leverage the parts of DTG printing that add value, like the magic of watching a shirt get printed before your eyes or taking your personalized shirt with you five minutes after ordering it. 

Adding Value to Maximize Profit

How can you add value to your product so you can justify a higher price? Value is a perceived number; honestly, people have no idea what it costs to make most of the things we buy. Does a Mercedes-Benz really cost that much more to make than a comparable Volkswagen? Probably not, but people are willing to pay more for the Mercedes because of its perceived value. The same is true of a T-shirt. 

For the digital decorator, coming up with creative ways to add value is essential. One great way to do it is by selling the personalization capabilities of DTG. Instead of getting 1000 identical shirts with a single-color logo and carrying a large inventory, the customer can spend a little more for full-color shirts, bought in smaller quantities and with each one personalized. Maybe each of their top customers gets their own dark, collared shirt with their name on it. Or, each owner at a car show gets a white shirt with a picture of their car, plus their name and car make and model as a left-chest design. Big, boring orders don’t work to the strengths of DTG. Your goal should be to get lots of individual ones.

Another way to add perceived value is to simply describe your product differently. Big orders often mean slinging out cheap shirts for nickels in profit, but you can work with a much higher quality base garment with DTG, so use that to your advantage. Instead of offering “Cotton shirts, cheapest prices,” pitch “100-percent ring-spun combed cotton crew necks.” Research how the garment manufacturers describe these high-end garments and use those terms in your own marketing. 

Understanding Your True Costs

Getting a handle on the cost to produce a garment with DTG can be tricky, especially for those trying to make their screen print cost spreadsheets bend to the new digital technology. My suggestion is to reinvent the way you look at your costs and, in turn, the way you price your products. Forget things like screen making, press setup, color changes, etc., and think instead about ink, pretreatment, labor, and packaging. It’s time to start fresh. 

Let’s break down the costs of producing a light garment and a dark garment in general terms. These are going to be round figures since ink cost, print time, maintenance, and other expenses will vary from one machine to the next, as well as by job. These figures simply illustrate the factors to consider when estimating your true cost for DTG printing: 

Blank Goods

With today’s DTG printers, it’s important to get a shirt that is made for inkjet printing. Without the right blank shirts, prints will simply not look as good, no matter what you try. 

Ink and Pretreatment

For light garments, we’re assuming you will not be using a pretreatment. Ultimately, your market will dictate that need. For most people, just ink on a shirt creates a fantastic, salable garment.

With dark garments, you’ll need to pretreat if you’re going to print white ink. Add in a layer of white ink with enough opacity to be a good underbase, too. (This is the reason the ink costs for dark shirts are so much higher.) 

Production Labor

To calculate this, factor in times for setup, pretreatment, and underbase printing for dark garments, loading and unloading, and curing. Use the hourly rate of a trusted employee as your base. Take the time to understand how long these steps really take; don’t just guess what you think you should make per hour. Be careful that you don’t price yourself out of the market or end up making no profit at all. 

Packaging

Even if you’re planning to hand-deliver the finished product to the customer, as a legitimate business, you’re going to put the finished goods in some sort of a package. Remember the idea of perceived value; it starts with presentation. 

Additional Labor

Consider the time it takes for an employee to take an order, as well as the time it takes to package and handle the job before delivery. 

Scrap, Maintenance, and More

Whether you like it or not, some shirts you print simply won’t make the cut. If an error occurs in production, there’s no fixing it. You must make a new one. Even the most efficient production facilities should consider a defect rate of 3 to 5 percent. Also factor in items like silicone and machine maintenance. 

Creating a Pricing Strategy

Just like costing, this is an area where I see many screen printers struggling with DTG because they are trying to fit it into their current price list. It’s important to think differently about how you price your digital decorating. Ask yourself, “Where can we gain efficiencies?” (Hint: It’s not from printing the same thing over and over.) With DTG, it’s not a “win” to print a one-colored job with block text and no gradients. Your efficiencies come from eliminating the initial setup and the speed at which you can print just one shirt. 

To set your pricing, you must figure out what you will need to make from a profit perspective, as well as making sure you cover your other costs, like rent, equipment lease payments, taxes, etc. Several pricing techniques can help you get to that number. Let’s explore two common ways.

The first is the cost-plus-markup method, where you take your cost to produce and then add a markup percentage that will satisfy your overhead and profit needs. For easy math, let’s use a profit factor of 0.5, or a 100-percent markup. You take the $5.00 you spend to print a light-colored shirt and divide by 0.5. That gives you $10.00. Now plug that markup into your spreadsheet and you have the selling price for all of your products. Easy.

The second approach takes more time and research, but it’s a more flexible way to determine your selling price. Start with a percentage value that is needed to cover your bills and add it to your cost to produce. Let’s say you need 25 percent to cover your bills, so you come up with $6.25 for light-colored shirts and $12.82 for dark. That’s the minimum you can charge for each shirt.

Then, do some research and determine what your target market will pay for a similar product. Maybe your target is bands and music enthusiasts. You’ll probably focus your efforts on dark garments. Let’s say you find that $15.00 seems to be the going price for these shirts. Or, assume your target audience is the high-end car market. Perhaps you find that those consumers are willing to pay $40.00 for a dark garment with an actual picture of their car on it. Why charge $12.82 when you can charge $40.00?

With this market pricing model, the key is to set your price and continue to track the trends. Are shirts selling faster than you can print them? Move the price up a bit. Are you struggling to get new customers? Maybe a sale for new customers is in order. This method is much more flexible and allows you to maximize your profits. With the markup method, you won’t always make as much as you could on some items, while you’ll be priced right out of the market on others.

I truly believe that DTG will revolutionize garment decorating, and if we approach it in the right way, we can maximize our profits while raising the perception of the common garment printer. Remember, it’s all about that word – perception – so before you turn on that new machine, be sure you’re ready to present what it has to offer in the smartest way.

Check out more from Aaron Montgomery or read the rest of Screen Printing's April/May 2017 issue.

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