Arlem International Pricing & Market Expansion Strategy 2026

@NickBrooks-ks3lspecsFeb 23, 2026

arlem

Document Version: 1.0 Created: January 3, 2026 Author: Nick + Claude Data Sources: Shopify Orders, Meta Marketing, Competitor Research, DFAT Tariff Data, Industry Reports

Executive Summary

Decision Area	Recommendation	Confidence
AU Pricing	$379 Double / $399 Queen / $429 King	HIGH
NZ Market	STRONG YES - Launch Q2 2026	HIGH
US Market	NEUTRAL - Test cautiously Q3 2026	MEDIUM
Shipping Strategy	Free AU, subsidised NZ, ALL-IN DDP for US	HIGH
Bundles	15% discount on cushion + quilt	HIGH

Bottom Line: Your proposed pricing is well-positioned against competitors. NZ is a natural expansion market with minimal friction. The US offers huge upside but comes with tariff complexity and competitive pressure.

Part 1: Australian Pricing Strategy

1.1 Proposed vs Current Pricing

SIZE PRICING EVOLUTION
═══════════════════════════════════════════════════════════════

                    Historical    Current      Proposed      Change
                    (Avg Sold)    (Website)    (Your Plan)
                    ──────────    ─────────    ───────────   ──────
Double              $331          $379         $379          +0%
Queen               $344          $389         $399          +$10
King                $360          $399         $429          +$30

Super King          N/A           $429         TBD           --

1.2 Unit Economics by Size (Proposed Pricing)

Linen Bedhead Cushions

Metric	Double	Queen	King
Selling Price	$379	$399	$429
COGS	$140	$145	$155
Gross Profit	$239	$254	$274
Gross Margin	63.1%	63.7%	63.9%
Payment Processing (3%)	$11.37	$11.97	$12.87
Contribution Margin	$227.63	$242.03	$261.13
Contribution %	60.1%	60.7%	60.9%

Boucle Bedhead Cushions

Metric	Double	Queen	King
Selling Price	$399	$419	$449
COGS	$150	$155	$165
Gross Profit	$249	$264	$284
Gross Margin	62.4%	63.0%	63.3%
Payment Processing (3%)	$11.97	$12.57	$13.47
Contribution Margin	$237.03	$251.43	$270.53
Contribution %	59.4%	60.0%	60.3%

Note: Added $20 premium on Boucle vs Linen to reflect higher fabric cost.

1.3 Pricing Analysis: Is This Too Expensive?

Competitor Benchmark (Australia)

Competitor	Product Type	Price Range	Notes
Zenn Design	Custom upholstered	$800-1,500+	Full bedheads, premium
The Bespoke Linen Co	Handmade linen	$450-600+	Hand-frayed, artisan
HeyHey Australia	Import (SOGA brand)	$89-149	Mass produced, synthetic
Etsy Australia	Handmade mixed	$200-400	Variable quality
Harvey Norman	Mass market	$79-199	Foam wedges, not fabric

Positioning Analysis

PRICE POSITIONING MAP (AUD, Queen Size)
═══════════════════════════════════════════════════════════════

$0        $200        $400        $600        $800        $1000+
│          │           │           │           │           │
├──────────┼───────────┼───────────┼───────────┼───────────┤
│          │           │           │           │           │
│  [Mass]  │           │   ARLEM   │ [Bespoke] │  [Zenn]   │
│  $89-149 │           │   $399    │ $450-600  │  $800+    │
│          │           │     ▲     │           │           │
│          │           │ Sweet Spot│           │           │
│          │           │           │           │           │
└──────────┴───────────┴───────────┴───────────┴───────────┘
   Import        Mid-Market      ARLEM     Premium      Luxury
   Low Quality   Uncertain       Position  Artisan      Custom

Verdict: NOT TOO EXPENSIVE

Reasons:

Handmade positioning justifies premium - You’re not competing with $89 imports
Below artisan competitors - The Bespoke Linen Co charges $450+
Value perception - Interior designer-made, Oeko-Tex linen, made-to-order
Historical validation - Sold 28 units at $340 avg without price resistance
Margin headroom - 60%+ contribution margin allows for ads, discounts if needed

Recommended Pricing Action

Size	Linen	Boucle	Rationale
Double	$379	$399	Most popular size, keep accessible
Queen	$399	$419	+$20 vs Double reflects size increase
King	$429	$449	+$30 vs Queen, premium buyers less price-sensitive
Super King	$459	$479	Niche size, ultra-premium buyers

Part 2: International Market Analysis

2.1 Market Overview

Total Addressable Market (TAM)

Market	Home Bedding Market 2025	Population	Households
Australia	$2.24B	26M	10.5M
New Zealand	$122.7M	5.2M	2.0M
United States	$16.74B	335M	130M

Serviceable Addressable Market (SAM)

Assuming bedhead cushions are 0.5-1% of home bedding market:

Market	SAM Estimate	Arlem Target (1% of SAM)
Australia	$11-22M	$110K-220K
New Zealand	$0.6-1.2M	$6K-12K
United States	$84-167M	$840K-1.67M

Serviceable Obtainable Market (SOM) - Year 1

Market	Conservative	Realistic	Optimistic
Australia	$25K (65 units)	$50K (130 units)	$75K (195 units)
New Zealand	$5K (12 units)	$10K (24 units)	$15K (36 units)
United States	$10K (22 units)	$25K (55 units)	$50K (110 units)

2.2 New Zealand Deep Dive

Market Assessment: STRONG YES

Factor	Score	Assessment
Market Size	7/10	Small but concentrated
Competition	9/10	Almost no direct competitors
Logistics	8/10	Easy shipping from AU
Currency	9/10	NZD similar to AUD
Cultural Fit	10/10	Same aesthetic preferences
Barrier to Entry	9/10	Minimal friction
OVERALL	8.7/10	STRONG YES

NZ Competitors

Competitor	Product	Price (NZD)	Threat Level
Bec’s Shed	Custom headboards	$1,200-2,500	Low (different product)
Budget Beds	Upholstered headboards	$1,199-2,098	Low (full headboards)
The Beige Epidemic	Custom headboards	$1,500+	Low (different product)
Heys NZ	SOGA foam wedges	$79-159	Low (cheap import)
Etsy NZ	Mixed handmade	$200-400	Medium

Key Finding: No one is selling handmade fabric bedhead CUSHIONS in NZ. It’s all either cheap foam wedges or expensive full headboards. Arlem fills a gap.

NZ Shipping & Pricing Model

NZ UNIT ECONOMICS (LINEN QUEEN)
═══════════════════════════════════════════════════════════════

                                    AUD         NZD
                                    ─────       ─────
Product Price (Queen)               $399        $449
Shipping to NZ (Sendle)            -$80        -$90
                                    ─────       ─────
Collected from Customer             $399        $449

COGS (Linen Queen)                 -$145       -$163
Shipping Cost (actual)             -$80        -$90
Payment Processing (3%)            -$12        -$13
                                    ─────       ─────
Gross Profit                        $162        $183
Gross Margin                        40.6%       40.7%

NZ Pricing Strategy

Option A: Free Shipping (Baked In)

Size	Price (NZD)	Margin	Pro	Con
Double	$449	38%	Clean UX	Lower margin
Queen	$469	39%	No surprises	Less competitive-looking
King	$509	40%	Premium feel

Option B: Shipping Additional

Size	Price (NZD)	+ Shipping	Total	Margin
Double	$399	$79	$478	35%
Queen	$419	$79	$498	36%
King	$459	$79	$538	37%

Option C: Subsidised Shipping (RECOMMENDED)

Size	Price (NZD)	+ Shipping	Total	You Absorb	Margin
Double	$419	$49	$468	$40	36%
Queen	$439	$49	$488	$40	37%
King	$479	$49	$528	$40	38%

Recommendation: Option C - Shows value (discounted shipping), maintains decent margin, clear pricing.

NZ Sales Forecast

Scenario	Monthly Units	Annual Revenue (NZD)	Annual Profit (NZD)
Conservative	1	$5,400	$2,000
Realistic	2	$10,800	$4,000
Optimistic	3	$16,200	$6,000

2.3 United States Deep Dive

Market Assessment: NEUTRAL

Factor	Score	Assessment
Market Size	10/10	Massive opportunity
Competition	6/10	Few direct competitors (see below)
Logistics	5/10	Complex, expensive shipping
Currency	7/10	USD favorable
Tariffs	6/10	10% reciprocal + fees (not as bad as feared)
Cultural Fit	6/10	Different bed sizes, preferences
Barrier to Entry	5/10	Significant friction
OVERALL	6.4/10	NEUTRAL

US Competitors

Important Note: There are very few TRUE competitors for removable bedhead cushions in the US. Most products in this space are either:

Full headboards (mounted, permanent, $800+)
Foam wedge pillows (cheap, not decorative, $50-100)
Wall-mounted panels (semi-permanent installation)

Competitor	Product	Price (USD)	Threat Level	Notes
Thuma Pillowboard	Mounted headboard	$375-445	LOW	Different product - wall-mounted foam panel, not a removable cushion. Requires installation. More like a headboard than a pillow.
Anthropologie Hemming	Linen cushion	$198	MEDIUM	Closer competitor but lower quality, single size
Home of Wool	Organic cushions	$364+	MEDIUM	Similar positioning, handmade, premium
West Elm Arne Pillow	Decorative pillow	$299-399	LOW	Decorative accent, not bedhead-specific
Amazon/Wayfair	Foam wedges	$49-99	LOW	Different market segment entirely
Etsy US	Handmade various	$100-300	MEDIUM	Variable quality, inconsistent

Key Insight: Arlem’s removable, handmade linen/boucle bedhead cushion has very few direct US competitors. The Thuma Pillowboard (often cited as competition) is actually a different product category - it’s a mounted headboard panel, not a removable comfort cushion.

US Tariff Breakdown (CORRECTED January 2026)

US IMPORT COST STRUCTURE FOR HS 9404.90.20
═══════════════════════════════════════════════════════════════

BASELINE (Pre-April 2025):
Under AUSFTA, HS 9404.90 products were DUTY-FREE (0%)

CURRENT SITUATION (April 2025+):
Trump's "Reciprocal Tariff" overrides AUSFTA benefits

Declared Value (CIF):               $379 USD (Queen example)

DUTIES & FEES:
├── AUSFTA Base Rate:               0%        = $0.00
├── Reciprocal Tariff (Australia):  10%       = $37.90
├── Merchandise Processing Fee:     0.3464%   = $33.58 (minimum)
├── Harbor Maintenance Fee:         0.125%    = $0.47
└────────────────────────────────────────────────────────
TOTAL IMPORT COSTS:                           ~$72.00

EFFECTIVE RATE:                               ~19% on $379

Key Tariff Facts:

AUSFTA originally provided 0% duty for HS 9404.90 (pillows/cushions)
The 10% “reciprocal tariff” (April 2025) overrides AUSFTA benefits for most goods
HS 9404.90 is NOT on the exemption list (unlike pharma, oil/gas, semiconductors, timber, critical minerals)
De minimis exemption ($800) suspended August 2025 - ALL shipments require formal entry
MPF has a $33.58 minimum, which applies to orders under ~$9,700

Exempted Products (NOT applicable to bedhead cushions):

Pharmaceuticals
Oil and gas
Timber/lumber
Semiconductors
Gold, copper, critical minerals
Beef, coffee, some fruits (added Nov 2025)

US Consumer Psychology: Critical Insights

Understanding your target buyer (affluent women, 35-55, homeowners) is essential for US pricing strategy.

Shipping Psychology

Statistic	Source	Implication
66% expect free shipping on ALL orders	2025 Consumer Studies	Bake it in
39% abandon cart due to surprise shipping	Statista 2025	Don’t show $49 shipping
82% prefer free shipping over fast shipping	Ryder 2025 Study	Speed doesn’t matter
Shipping feels like “pure loss” to consumers	Consumer behavior research	Psychological discomfort

“When you’re buying a $400 cushion, that $400 feels like part of the value exchange. But when a $49 shipping charge appears at checkout, it feels like a penalty. The brain interprets shipping costs as pure loss.”

Duty/Tariff Psychology

Statistic	Source	Implication
68% of young US consumers experienced surprise customs fees	2025 Survey	They hate it
75% would rethink buying from retailer after surprise fees	Global Consumer Study	One strike, you’re out
10% of DDU parcels refused or returned	Shipping industry data	Lost sales + costs
DDP increases delivery success by 5-15%	DHL/Carrier data	Worth the margin hit
DDP reduces returns by 20-30%	Industry benchmarks	Major savings

“Your target buyer is used to Amazon Prime. She expects to click 'Buy Now' and have the product arrive. Any friction - surprise fees at checkout OR at delivery - kills the sale and the relationship.”

The Affluent Mum Psychology

Your ideal US customer:

Expects seamlessness - Prime has trained her to expect zero friction
Will pay premium for convenience - She values her time over money
Hates being “tricked” - Surprise fees feel dishonest, not just expensive
Shares bad experiences - One duty surprise = negative review + social media post
Remembers good experiences - “All-in pricing, free shipping” = repeat customer + referrals

US Pricing Strategy: ALL-IN DDP (RECOMMENDED)

Based on consumer psychology research, the ONLY viable strategy for the US market is Delivered Duty Paid (DDP) with free shipping baked into the price.

US ALL-IN PRICING MODEL (LINEN QUEEN)
═══════════════════════════════════════════════════════════════

WHAT CUSTOMER SEES:
"$499 USD - Free Shipping to USA"
(No surprises. No duties. No fees. Done.)

YOUR COST BREAKDOWN:
                                    USD
                                    ─────
Customer Pays                       $499.00

Less: COGS                         -$92.00
Less: Shipping (Sendle)            -$63.00
Less: Duties You Pre-Pay           -$72.00
Less: Payment Processing (3%)      -$14.97
                                    ─────────
YOUR GROSS PROFIT                   $257.03
YOUR GROSS MARGIN                   51.5%

Recommended US All-In Pricing

Size	All-In Price (USD)	Your Margin	vs AU Price
Double	$479	50%	+26%
Queen	$499	51%	+25%
King	$549	53%	+28%

Why This Works:

No cart abandonment - Price is price, no surprises
No delivery refusals - You’ve pre-paid duties
Premium positioning - “Australian handmade, delivered free” justifies premium
Clean messaging - “Ships free from Australia in 10-14 days”
Competitive - $499 Queen vs Anthropologie $198 (lower quality) and Home of Wool $364+

Implementation Notes:

Use DDP shipping service (Sendle offers this, or use a customs broker)
Pre-pay duties or use a service like Zonos/Passport for automated duty calculation
Clearly state “Price includes all duties and taxes - no additional fees”
Product page should emphasise: “Ships from Australia. Free delivery. No hidden fees.”

US Unit Economics Comparison

DDP ALL-IN vs DDU (Customer Pays Duties)
═══════════════════════════════════════════════════════════════

                              DDU             DDP ALL-IN
                              (Old Model)     (Recommended)
                              ──────────      ──────────────
Customer Sees at Checkout     $379 + $49      $499
Customer Pays at Delivery     +$72 duties     $0
TOTAL CUSTOMER COST           $500            $499

Your Revenue                  $379            $499
Your Costs                    -$170           -$242
Your Profit                   $209            $257
Your Margin                   55%             51.5%

Conversion Rate (expected)    1-2%            3-4%
Cart Abandonment              High            Low
Delivery Refusal Risk         10%             0%
Customer Satisfaction         Poor            Excellent
Repeat Purchase Rate          Low             High

Verdict: DDP all-in pricing generates HIGHER absolute profit despite lower margin percentage, due to dramatically better conversion and zero delivery issues.

US Market: Two-Phase Strategy

The US market strategy has two distinct phases with dramatically different economics:

PHASE 1: Ship from Australia (2026)

Model: DDP all-in pricing, ship individual orders from Adelaide via Sendle

PHASE 1 UNIT ECONOMICS (SHIP FROM AU)
═══════════════════════════════════════════════════════════════

Customer Price (Queen):              $499 USD (all-in, free shipping)

Your Costs:
  COGS (AU production):              $92
  International Shipping (Sendle):   $63
  Import Duties (10% + MPF):         $72
  Payment Processing (3%):           $15
                                     ─────
  TOTAL COST:                        $242

PROFIT PER UNIT:                     $257 (51.5% margin)
DELIVERY TIME:                       10-14 days

Phase 1 Forecast (2026 - Test Year)

Scenario	Monthly Units	Annual Revenue (USD)	Annual Profit (USD)
Conservative	2-3	$12,000	$5,500
Realistic	4-6	$30,000	$14,000
Optimistic	8-12	$60,000	$28,000

Purpose: Validate demand, test logistics, build reviews before investing in US infrastructure.

PHASE 2: US Distribution Center (2027+)

Model: Bali production → Houston warehouse → 2-5 day domestic shipping

PHASE 2 UNIT ECONOMICS (BALI → HOUSTON → CUSTOMER)
═══════════════════════════════════════════════════════════════

Customer Price (Queen):              $399 USD (competitive, free shipping)

Your Costs:
  COGS (Bali production):            $95
  Ocean Freight (Bali → Houston):    $10/unit (bulk)
  US Import Duty (10% on cost):      $10
  MPF (spread across shipment):      $1
                                     ─────
  LANDED COST IN HOUSTON:            $116

  Warehouse Storage:                 $3/unit/month
  Pick & Pack:                       $6
  Domestic Shipping (USPS):          $18
                                     ─────
  FULFILLMENT COST:                  $27

  Payment Processing (3%):           $12
                                     ─────
  TOTAL COST:                        $155

PROFIT PER UNIT:                     $244 (61% margin)
DELIVERY TIME:                       2-5 days

Phase 1 vs Phase 2 Comparison

Metric	Phase 1 (Ship from AU)	Phase 2 (Houston DC)
Customer Price	$499	$399
Your Profit/Unit	$257	$244
Margin	51.5%	61%
Delivery Time	10-14 days	2-5 days
Customer Experience	Good	Excellent
Scalability	Limited	Unlimited
Upfront Investment	$0	~$20K inventory
Break-even Volume	1 unit	~80 units

Phase 2 Forecast (2027-2029)

2027 - First Full Year with Houston Warehouse

Scenario	Monthly Units	Annual Units	Revenue (USD)	Profit (USD)
Conservative	25-40	300-500	$120-200K	$73-122K
Realistic	50-80	600-1000	$240-400K	$146-244K
Optimistic	100-150	1200-1800	$480-720K	$293-439K

2028 - Scaled Operations

Scenario	Monthly Units	Annual Units	Revenue (USD)	Profit (USD)
Conservative	60-100	700-1200	$280-480K	$171-293K
Realistic	120-180	1500-2200	$600-880K	$366-537K
Optimistic	250-350	3000-4200	$1.2-1.7M	$732K-1M

2029 - Mature US Business

Scenario	Monthly Units	Annual Units	Revenue (USD)	Profit (USD)
Conservative	100-150	1200-1800	$480-720K	$293-439K
Realistic	200-300	2500-3600	$1-1.4M	$610-878K
Optimistic	400-500	5000-6000	$2-2.4M	$1.2-1.5M

Houston Distribution Center Setup

Item	Cost	Notes
Initial Inventory (100-150 units)	$15-20K	Landed and ready to ship
Monthly Warehouse/Storage	$200-500	Partner arrangement in Houston
Pick/Pack per order	$6-8	Self-managed or 3PL
Domestic Shipping	$15-20/unit	USPS Priority Mail
Insurance	$50-100/mo	Product liability

Break-even: ~80 orders covers initial setup friction. At realistic volume (50+ orders/month), ROI is immediate.

Part 3: Bundle Pricing Strategy

3.1 Quilt/Duvet Bundle Concept

Product Pairing

Bundle Components	Individual Price	Bundle Price	Discount
Linen Bedhead + Linen Quilt Cover	$399 + $299 = $698	$595	15%
Linen Bedhead + Quilt + Pillowcases	$399 + $299 + $89 = $787	$669	15%
Boucle Bedhead + Linen Quilt Cover	$419 + $299 = $718	$610	15%
“Complete Bedroom” Bundle	$399 + $299 + $89 + $79 throw = $866	$695	20%

Bundle Unit Economics

LINEN BEDHEAD + QUILT COVER BUNDLE (Queen)
═══════════════════════════════════════════════════════════════

                              Individual      Bundle        Change
                              ──────────      ──────        ──────
REVENUE
  Linen Bedhead               $399            $349          -12.5%
  Linen Quilt Cover           $299            $246          -17.7%
                              ─────           ─────
  TOTAL REVENUE               $698            $595          -14.8%

COGS
  Bedhead COGS                $145            $145          --
  Quilt Cover COGS            $80             $80           --
                              ─────           ─────
  TOTAL COGS                  $225            $225          --

GROSS PROFIT                  $473            $370          -21.8%
GROSS MARGIN                  67.8%           62.2%         -5.6pp

CONTRIBUTION (after 3%)       $452            $352          -22.1%
CONTRIBUTION MARGIN           64.8%           59.2%         -5.6pp

Bundle Strategy Assessment

Factor	Analysis
AOV Impact	+$196 per bundled order (+49% vs bedhead alone)
Margin Trade-off	-5.6pp margin but +$103 absolute profit per order
Conversion Impact	Expected +15-20% conversion on bundle page
Inventory Risk	Must stock matching quilt covers
Production Complexity	Moderate - separate fulfillment

Recommended Bundle Lineup

Tier 1: Entry Bundle

“Bedhead + Quilt Set”

Linen Bedhead Cushion (any size)
Matching Linen Quilt Cover (same colour)
Price: 15% off combined
Target AOV: $550-650

Tier 2: Complete Bedroom

“Bedroom Refresh Bundle”

Linen Bedhead Cushion
Matching Quilt Cover
2x Linen Pillowcases
Price: 18% off combined
Target AOV: $700-800

Tier 3: Ultimate

“Total Bedroom Makeover”

Linen Bedhead Cushion
Matching Quilt Cover
2x Linen Pillowcases
Linen Throw
Price: 20% off combined
Target AOV: $850-1000

Bundle Sales Forecast

Scenario	Bundle Rate	Monthly Bundles	Monthly Bundle Revenue
Conservative	15% of orders	1-2	$600-1,200
Realistic	25% of orders	3-5	$1,800-3,000
Optimistic	35% of orders	5-8	$3,000-4,800

Part 4: Bali Production Model

4.1 The Scaling Unlock

The key constraint in the original business model was Emily’s production capacity (~180 units/year maximum). Bali production removes this ceiling entirely.

Why Bali Works

Factor	Assessment
COGS	Similar to AU (~$95 USD) - quality materials, skilled labour
Quality	Excellent textile/upholstery expertise in Bali
Scalability	Unlimited - can scale to 10,000+ units/year
Lead Time	4-6 weeks for bulk orders
Shipping	Cheaper than AU (Indonesia → US routes well-established)
Emily’s Role	Design, QC, marketing, customer experience

Bali COGS Breakdown

BALI PRODUCTION COST (LINEN QUEEN)
═══════════════════════════════════════════════════════════════

Materials:
  Cushion Fill (high-density foam)   $35
  Inner Cotton Layer                 $8
  Zipper (YKK quality)               $2
  Linen Cover Fabric                 $40
                                     ─────
  MATERIALS SUBTOTAL                 $85

Labour & Overhead:
  Skilled Labour                     $8
  QC & Packaging                     $2
                                     ─────
  LABOUR SUBTOTAL                    $10

TOTAL COGS (Bali):                   $95 USD

Note: Boucle fabric adds ~$10, making Boucle COGS ~$105.

4.2 Production Model by Market

Australia & New Zealand

BALI → AUSTRALIA MODEL
═══════════════════════════════════════════════════════════════

Route: Bali → Melbourne Warehouse → AU/NZ Customers

COGS (Bali):                         $95 AUD
Ocean Freight (Bali → Melbourne):    $8/unit (bulk)
Import Duty (AU):                    $0 (AANZFTA - Free Trade)
Customs/Handling:                    $2
                                     ─────
LANDED COST IN MELBOURNE:            $105

Warehouse/Pick-Pack:                 $8
Domestic Shipping (AU):              $15
                                     ─────
TOTAL DELIVERED COST:                $128

At $399 price:
  Revenue:                           $399
  Costs:                             $128
  Processing (3%):                   $12
  PROFIT:                            $259 (65% margin)

United States

BALI → HOUSTON MODEL
═══════════════════════════════════════════════════════════════

Route: Bali → Houston Warehouse → US Customers

COGS (Bali):                         $95 USD
Ocean Freight (Bali → Houston):      $10/unit (bulk)
Import Duty (10% on cost):           $10
MPF (spread):                        $1
                                     ─────
LANDED COST IN HOUSTON:              $116

Warehouse/Pick-Pack:                 $9
Domestic Shipping (USPS):            $18
                                     ─────
TOTAL DELIVERED COST:                $143

At $399 price:
  Revenue:                           $399
  Costs:                             $143
  Processing (3%):                   $12
  PROFIT:                            $244 (61% margin)

4.3 Production Capacity vs Demand

Production Source	Max Capacity	Best For
Emily (Adelaide)	~180/year	Prototypes, custom orders, local events
Bali Partner	5,000+/year	All standard production
Bali (scaled)	20,000+/year	If demand warrants multiple workshops

The business is no longer production-constrained. It’s demand-constrained.

4.4 Quality Control Process

Stage	Action	Responsibility
Design	Create specs, samples, approve	Emily
Materials	Source & approve fabrics	Emily + Bali partner
Production	Manufacture to spec	Bali workshop
QC Check	Photo verification before shipping	Bali partner
Receiving QC	Spot-check on arrival	Nick/Emily (AU) or Partner (US)
Issue Resolution	Handle any defects	Emily

Part 5: Complete Sales Forecast

5.1 2026 Forecast (Transition Year - Emily Production + Bali Test)

Australia (Emily Production → Bali Transition Q4)

Conservative Scenario

                    Q1 2026   Q2 2026   Q3 2026   Q4 2026   TOTAL
                    ───────   ───────   ───────   ───────   ─────
Bedhead Units          8        12        15        18       53
Avg Price            $404      $404      $404      $404
Bedhead Revenue    $3,232    $4,848    $6,060    $7,272   $21,412

Bundles               1         2         3         4       10
Bundle Revenue      $595     $1,190    $1,785    $2,380    $5,950

TOTAL REVENUE      $3,827    $6,038    $7,845    $9,652   $27,362

Realistic Scenario

                    Q1 2026   Q2 2026   Q3 2026   Q4 2026   TOTAL
                    ───────   ───────   ───────   ───────   ─────
Bedhead Units         15        25        35        45      120
Avg Price            $404      $404      $404      $404
Bedhead Revenue    $6,060   $10,100   $14,140   $18,180   $48,480

Bundles               3         6         9        12       30
Bundle Revenue     $1,785    $3,570    $5,355    $7,140   $17,850

TOTAL REVENUE      $7,845   $13,670   $19,495   $25,320   $66,330

Optimistic Scenario

                    Q1 2026   Q2 2026   Q3 2026   Q4 2026   TOTAL
                    ───────   ───────   ───────   ───────   ─────
Bedhead Units         25        40        55        75      195
Avg Price            $404      $404      $404      $404
Bedhead Revenue   $10,100   $16,160   $22,220   $30,300   $78,780

Bundles               5        10        15        20       50
Bundle Revenue     $2,975    $5,950    $8,925   $11,900   $29,750

TOTAL REVENUE     $13,075   $22,110   $31,145   $42,200  $108,530

New Zealand 2026 (Ship from AU)

Realistic Scenario

                    Q1 2026   Q2 2026   Q3 2026   Q4 2026   TOTAL
                    ───────   ───────   ───────   ───────   ─────
Bedhead Units          0         3         5         7       15
Avg Price (NZD)       --      $468      $468      $468
Revenue (NZD)         $0    $1,404    $2,340    $3,276    $7,020

Bundles               0         0         1         2        3
Bundle Revenue        $0        $0      $650    $1,300    $1,950

TOTAL (NZD)           $0    $1,404    $2,990    $4,576    $8,970
TOTAL (AUD)           $0    $1,250    $2,660    $4,070    $7,980

United States 2026 (Phase 1: Ship from AU, DDP)

Realistic Scenario (Test Market - Ship from AU)

                    Q1 2026   Q2 2026   Q3 2026   Q4 2026   TOTAL
                    ───────   ───────   ───────   ───────   ─────
Bedhead Units          0         0         5        10       15
Avg Price (USD)       --        --      $499      $499
Revenue (USD)         $0        $0    $2,495    $4,990    $7,485

Bundles               0         0         0         2        2
Bundle Revenue        $0        $0        $0    $1,200    $1,200

TOTAL (USD)           $0        $0    $2,495    $6,190    $8,685
TOTAL (AUD)           $0        $0    $3,950    $9,800   $13,750

Note: 2026 US sales ship from Australia (Phase 1). Houston DC launches 2027.

2026 Combined Summary (All Markets)

Market	Units	Revenue	Gross Profit	Margin
Australia	120	$66,330 AUD	$39,800	60%
New Zealand	15	$8,970 NZD	$3,200	40%
United States	15	$8,685 USD	$3,850	44%
TOTAL 2026	150	~$90K AUD	~$47K	52%

5.2 2027-2029 Forecast (Bali Production + US Distribution Center)

Multi-Year Revenue Projection (Realistic Scenario)

ARLEM MULTI-YEAR FORECAST (REALISTIC SCENARIO)
═══════════════════════════════════════════════════════════════

                        2026        2027        2028        2029
                        ────        ────        ────        ────
PRODUCTION MODEL:
  Australia             Emily       Bali→AU     Bali→AU     Bali→AU
  United States         Ship AU     Bali→Houston Bali→Houston Bali→Houston

AUSTRALIA:
  Units                 120         300         450         600
  Price                 $399        $399        $399        $399
  Revenue               $48K        $120K       $180K       $240K
  Margin                60%         65%         65%         65%
  Profit                $29K        $78K        $117K       $156K

NEW ZEALAND:
  Units                 15          40          70          100
  Price (NZD)           $449        $449        $449        $449
  Revenue (NZD)         $7K         $18K        $31K        $45K
  Profit (AUD)          $3K         $7K         $13K        $18K

UNITED STATES:
  Units                 15          800         1,800       3,000
  Price (USD)           $499        $399        $399        $399
  Revenue (USD)         $7K         $319K       $718K       $1.2M
  Margin                44%         61%         61%         61%
  Profit (USD)          $3K         $195K       $439K       $732K

─────────────────────────────────────────────────────────────────
TOTAL (Converted to AUD):

  Total Units           150         1,140       2,320       3,700
  Total Revenue         $90K        $620K       $1.35M      $2.2M
  Total Profit          $35K        $340K       $700K       $1.1M
  Avg Margin            39%         55%         52%         50%
═══════════════════════════════════════════════════════════════

Year-by-Year Business Evolution

2026: Validation Year

Emily produces for AU/NZ
Test US market with DDP shipping from AU
Establish Bali production partner
Goal: Prove US demand, set up Houston logistics

2027: Scale Year

Bali production live for all markets
Houston DC operational
US becomes primary growth market
Goal: 800+ US units, 300+ AU units

2028: Growth Year

Optimise ad spend across markets
Add product variations (new colours, sizes)
Consider UK/EU expansion
Goal: $1M+ revenue, $500K+ profit

2029: Maturity Year

Established brand in US home decor space
Strong repeat customer base
Possible team expansion
Goal: $2M+ revenue, path to $5M

5.3 Scenario Comparison (US Market Focus)

Conservative vs Realistic vs Optimistic (US Only)

US MARKET SCENARIOS (2027-2029)
═══════════════════════════════════════════════════════════════

CONSERVATIVE (Passive marketing, limited ad spend)
                        2027        2028        2029
  Units                 400         700         1,000
  Revenue (USD)         $160K       $280K       $400K
  Profit (USD)          $98K        $171K       $244K

REALISTIC (Active marketing, $50-100K ad spend/year)
                        2027        2028        2029
  Units                 800         1,800       3,000
  Revenue (USD)         $319K       $718K       $1.2M
  Profit (USD)          $195K       $439K       $732K

OPTIMISTIC (Viral moment, PR coverage, scaled ads)
                        2027        2028        2029
  Units                 1,500       3,500       6,000
  Revenue (USD)         $599K       $1.4M       $2.4M
  Profit (USD)          $366K       $854K       $1.46M

What Drives Each Scenario

Scenario	Ad Spend	Conversion Rate	Key Assumption
Conservative	$20-30K/yr	2%	Word of mouth, organic only
Realistic	$75-100K/yr	3%	Optimised Meta/Pinterest ads
Optimistic	$150-200K/yr	4%	PR hit, influencer coverage, viral content

5.4 Four-Year Financial Summary

ARLEM FOUR-YEAR FINANCIAL SUMMARY (REALISTIC SCENARIO)
═══════════════════════════════════════════════════════════════

                        2026        2027        2028        2029        TOTAL
                        ────        ────        ────        ────        ─────
Total Units             150         1,140       2,320       3,700       7,310
Total Revenue (AUD)     $90K        $620K       $1.35M      $2.2M       $4.26M
Total Profit (AUD)      $35K        $340K       $700K       $1.1M       $2.18M
Cumulative Profit       $35K        $375K       $1.08M      $2.18M

Key Milestones:
  - First $100K revenue:     Q2 2027
  - First $1M revenue:       Q3 2028
  - First $1M profit:        Q4 2028
  - US > AU revenue:         Q1 2027

Revenue Mix Evolution

Year	Australia	New Zealand	United States
2026	73%	8%	19%
2027	19%	3%	78%
2028	13%	2%	85%
2029	11%	2%	87%

Key Insight: By 2027, the US becomes the dominant market. Australia remains important for brand credibility and local presence, but the US is where the scale lives.

Part 6: Market Entry Recommendations

6.1 Market Priority Matrix

MARKET PRIORITY ASSESSMENT
═══════════════════════════════════════════════════════════════

           Opportunity ──────────────────────────────────────►
           Low                  Medium                  High
        │
 Easy   │   [Not worth it]      NEW ZEALAND            [N/A]
        │                       ★ STRONG YES
        │                       Launch Q2 2026
Effort  │
        │
        │
        │   [Not worth it]      AUSTRALIA              UNITED STATES
        │                       ★ STRONG YES           ★ NEUTRAL
 Hard   │                       (Already there)        Test Q3 2026
        │
        ▼

6.2 New Zealand: STRONG YES

Why NZ Makes Sense

No direct competitors - Gap in market for handmade bedhead cushions
Minimal friction - Same language, similar culture, easy shipping
Favorable logistics - Sendle NZ$88 shipping is workable
Currency simplicity - NZD pricing is straightforward
Low risk - Small market = low downside if it fails

NZ Launch Checklist

Task	Priority	Timing
Enable NZ market in Shopify Markets	High	Week 1
Set NZD pricing (see Section 2.2)	High	Week 1
Add NZ shipping zone with $49 rate	High	Week 1
Update product descriptions for NZ (size names)	Medium	Week 2
Create NZ-specific meta descriptions	Medium	Week 2
Consider nz.arlem.com.au subdomain	Low	Month 2
NZ-targeted Instagram/Pinterest content	Medium	Ongoing

NZ Website Customization

Option 1: Shopify Markets Subfolder (Recommended for Start)

URL: arlem.com.au/nz/
Automatic currency detection
Shared SEO authority
Zero additional cost

Option 2: Subdomain

URL: nz.arlem.com.au
Slightly more “local” feel
Same Shopify store
Minimal additional effort

Option 3: Separate Domain

URL: arlem.co.nz
Most local feel
Separate SEO building required
Additional domain cost
NOT recommended until NZ proves out

NZ-Specific Considerations

Item	AU vs NZ Difference
Bed Sizes	Same: Single, Double, Queen, King, Super King
Terminology	Same: “Bedhead” used in both markets
Aesthetic	Same: Scandi, coastal, minimalist trends
Currency	NZD ~12% weaker than AUD
GST	NZ 15% vs AU 10% (factor into pricing)

6.3 United States: NEUTRAL (Proceed with Caution)

Why US is Uncertain

Positives:

Massive market ($16.74B home bedding)
USD pricing favorable for margins
Strong appetite for handmade/artisan goods
“Australian-made” has cachet
Few direct competitors - Most are either cheap foam wedges or mounted headboards
Unique product - Removable handmade fabric cushion fills a gap

Negatives:

10% reciprocal tariff + ~$34 MPF minimum = ~$72 per order in duties
Consumer psychology demands all-in pricing (baked-in shipping + duties)
Different bed sizes (Twin/Full vs Single/Double)
Expensive shipping ($63 USD via Sendle)
Returns would be costly/impractical

US Launch Conditions

Do NOT enter US market until:

NZ market is validated (5+ orders)
AU market hitting realistic scenario (10+ orders/month)
Capacity confirmed for international production
DDP shipping solution tested and working (Sendle DDP, Zonos, or customs broker)

US Soft Launch Strategy

Phase 1: Test (Q3 2026)

Enable US market in Shopify
Set ALL-IN DDP pricing: $479 Double / $499 Queen / $549 King
NO separate shipping or duties shown - everything baked in
Accept orders passively (no marketing)
Goal: 5 orders to validate demand and process

Phase 2: Evaluate (Q4 2026)

Review: conversion rate, margin, customer feedback
Assess: duty complaints, shipping issues, returns
Decision: Scale or withdraw

Phase 3: Scale (2027 if validated)

Consider US-based 3PL for stock holding
Evaluate US manufacturing partnership
Targeted Meta/Pinterest ads to US audience

US Website Customization

Element	Adaptation Required
Currency	USD display, Shopify Markets handles this
Size Names	Twin, Full, Queen, King, California King
Shipping Messaging	“Ships from Australia (7-14 days)”
Duties Disclaimer	CRITICAL - must be prominent
Size Guide	US mattress dimensions
Returns Policy	No returns on international orders

US Duty Disclosure Language

Recommended checkout/product page text:

International Orders (USA)

Your order ships from Adelaide, Australia. US Customs may collect import duties (typically 15-16% of order value) upon delivery. These charges are the responsibility of the buyer and are not included in our prices.

Estimated delivery: 7-14 business days

6.4 Decision Summary Table

Market	Verdict	Action	Timing	Investment
Australia	STRONG YES	Continue + scale	Now	Primary focus
New Zealand	STRONG YES	Launch	Q2 2026	Minimal setup
United States	NEUTRAL	Test cautiously	Q3 2026	Passive only
UK/Europe	NO	Do not pursue	–	–
Asia	STRONG NO	Do not pursue	–	–

Part 7: Implementation Roadmap

7.1 Pricing Changes (Week 1)

Action	Current	New	When
Linen Queen	$389	$399	Immediate
Linen King	$399	$429	Immediate
Boucle pricing	Same as Linen	+$20 premium	Immediate
Super King option	$429	$459	If adding

7.2 New Zealand Market (Q2 2026)

Week	Tasks
1	Enable NZ in Shopify Markets, set NZD pricing
2	Configure NZ shipping zone ($49 subsidised)
3	Update product pages with NZ-friendly content
4	Soft launch - enable checkout for NZ
5-8	Monitor orders, refine if needed
9-12	Evaluate: continue, scale, or pause

7.3 United States Market (Q3-Q4 2026)

Month	Tasks
July	Enable US in Shopify Markets with DDP pricing
July	Set up DDP shipping (Sendle DDP or Zonos integration)
July	Configure all-in pricing: $479/$499/$549 (no separate shipping/duties)
Aug	Accept first US orders passively
Aug-Sep	Monitor 5-10 orders for learnings
Oct	Evaluate: customer satisfaction, margin, process
Nov	Decision: scale marketing or pause

7.4 Bundle Launch (Q2 2026)

Week	Tasks
1	Source/confirm quilt cover supplier and COGS
2	Create bundle product pages
3	Set up Shopify bundle discounts
4	Launch bundles alongside NZ market
5-8	Monitor bundle conversion rate

Part 8: Key Metrics to Track

8.1 Pricing Health Metrics

Metric	Target	Warning Sign
Cart abandonment rate	<70%	>80% = price resistance
Conversion rate	>2%	<1% = may be too expensive
Units at new price vs old	Similar volume	Sharp drop = price elasticity issue
Customer price feedback	Neutral/positive	Complaints = reassess

8.2 International Market Metrics

Metric	NZ Target	US Target (DDP)
Orders/month (M3)	2+	2+
Conversion rate	>1.5%	>2% (DDP should help)
Customer satisfaction	No complaints	No duty complaints (DDP)
Margin achieved	>35%	>50%
Return rate	<5%	<3% (no duty refusals)

8.3 Bundle Metrics

Metric	Target
Bundle attachment rate	>20% of orders
Bundle AOV	>$550
Bundle margin	>55%

Appendix A: Competitor Price Database

Australian Competitors

Brand	Product	Size	Price (AUD)	Material
Arlem (proposed)	Linen Bedhead	Queen	$399	Linen
Arlem (proposed)	Boucle Bedhead	Queen	$419	Boucle
The Bespoke Linen Co	Loomed Cushion	Standard	$450+	Linen
Zenn Design	Pillow Bedhead	Custom	$800-1,500	Various
HeyHey/SOGA	Wedge Pillow	150cm	$99-149	Polyester

US Competitors

Important: Most “competitors” are actually different product categories.

Brand	Product	Size	Price (USD)	Material	Direct Competitor?
Arlem (proposed)	Linen Bedhead	Queen	$499 (DDP)	Linen	N/A
Thuma	Pillowboard	Queen	$375-425	Linen/Wool	NO - Mounted headboard panel, requires installation
West Elm	Arne Pillow	Queen	$299-399	Velvet/Linen	NO - Decorative pillow, not bedhead-specific
Anthropologie	Hemming Cushion	One size	$198	Linen	PARTIAL - Similar concept but lower quality
Home of Wool	Headboard Cushion	Custom	$364+	Wool/Organic	YES - Closest direct competitor
Amazon/Wayfair	Foam Wedges	Various	$49-99	Foam/Polyester	NO - Different market segment

NZ Competitors

Brand	Product	Size	Price (NZD)	Notes
Arlem (proposed)	Linen Bedhead	Queen	$468 total	Only direct competitor
Bec’s Shed	Custom Headboard	Queen	$1,500+	Different product
Budget Beds	Upholstered Headboard	Queen	$1,199+	Different product

Appendix B: Tariff Reference (Corrected January 2026)

US Import Duties for Bedhead Cushions

Pre-April 2025 (AUSFTA in Effect)

HS Code	Description	AUSFTA Rate
9404.90.1000	Cotton-stuffed pillows/cushions	0% (Duty Free)
9404.90.2000	Synthetic-stuffed	0% (Duty Free)

Post-April 2025 (Reciprocal Tariffs Override AUSFTA)

HS Code	Description	AUSFTA Base	Reciprocal Tariff	Effective Rate
9404.90.1000	Cotton-stuffed	0%	+10%	10%
9404.90.2000	Synthetic-stuffed	0%	+10%	10%

Additional Fees (Always Apply):

Merchandise Processing Fee: 0.3464% (minimum $33.58, maximum $538.40)
Harbor Maintenance Fee: 0.125% (ocean freight only)

Practical Example: $379 USD Bedhead Cushion

DUTY CALCULATION
═══════════════════════════════════════════════════════════════
Declared Value:                     $379.00
Reciprocal Tariff (10%):            $37.90
MPF (0.3464% = $1.31, but minimum): $33.58
HMF (0.125%):                       $0.47
                                    ───────
TOTAL DUTIES/FEES:                  $71.95

Effective Rate:                     ~19%

Key Points:

AUSFTA 0% base rate is OVERRIDDEN by reciprocal tariff
HS 9404.90 is NOT on exemption list
MPF minimum of $33.58 applies to orders under ~$9,700
De minimis ($800) exemption suspended August 2025
Recommend DDP shipping to absorb these costs in all-in pricing

NZ Import Duties

No import duties for Australian goods under CER (Closer Economic Relations)
NZ GST (15%) is collected by Shopify at checkout for goods under $1,000 NZD

Appendix C: Shopify Markets Setup

Enabling New Markets

Shopify Admin > Settings > Markets
Click “Add Market”
Select countries (New Zealand, United States)
Configure:

- Local currency (NZD, USD) - Local pricing (can be adjusted per market) - Shipping rates (per zone) - Duties collection (for US: leave to customer)

Recommended Market Configuration

Setting	Australia	New Zealand	United States
Currency	AUD	NZD	USD
Price adjustment	Base	+10%	-10% (to hit USD targets)
Shipping	Free over $150	$49 flat	$49 flat
Duties collected	N/A	N/A (CER)	No (customer pays)
Domain	arlem.com.au	arlem.com.au/nz/	arlem.com.au/us/

Document Control:

Version	Date	Author	Changes
1.0	Jan 3, 2026	Nick + Claude	Initial strategy document
1.1	Jan 3, 2026	Nick + Claude	Corrected US tariffs (10% reciprocal, not 15.8%); Added consumer psychology analysis; Updated to DDP all-in pricing model; Clarified Thuma is NOT a direct competitor; Revised US forecasts upward
2.0	Jan 3, 2026	Nick + Claude	MAJOR UPDATE: Added Bali production model; Two-phase US strategy (Ship from AU → Houston DC); Multi-year forecasts 2026-2029; Realistic scenario shows $2.2M revenue by 2029

“NZ is the low-hanging fruit. The US is the moonshot. But with Bali production and a Houston DC, the moonshot becomes a launchpad. By 2029, this is a $2M+ business with $1M+ profit.”