You create your shop with your designs. Each style of shirt or merchandise will have a base price. This means this is what CafePress charges for the shirt and print. You can add onto that price to make whatever profit you'd like. Here is an example.
White t-shirt's base price is $15.00. You want to make a profit of $5 per shirt, so you'd need to sell the shirt for $20.00. CafePress gets the base price and you get whatever amount you mark it above that.
Keep in mind the price I gave is an estimate and most likely not the actual price. When I had a site up there a few years back a white t-shirt price was around $15.
Yeah they do make a lot of money, but it gives people the chance to create a t-shirt line completely free without having to buy all the equipment. And they do all the work for you, all you have to do is upload the designs.
Cafe Press used to be heat press, but as I understand it it's now (since introducing dark garment printing) a combination of heat press and direct to garment. I would imagine/speculate that they'll slowly ramp up the direct printing and phase out the heat pressing.
You set your markup above their base price and your commission is the difference between the two. The white t-shirt is $13.99 and the have a lighter weight t-shirt with a base price of just $8.99 printed.
Some peopel sell t-shirts for $15.00 each, some sell t-shirts for $20+ each and make a bigger profit.
You also have to consider, that the base price is not just the cost of the garment and the printing. They also setup your online store, process credit cards, host your store, handle customer service, have a heavily promoted marketplace.
So basically, they take all of the risk out of setting up an online t-shirt shop (little to no upfront investment), and the tradeoff is, they pay for their service with the base prices (you don't pay if you don't sell...at least with a basic store).
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