I’m not in the soft-goods industry but I’ll do my best to answer your questions-
The concern of charging too much, and fees vs royalties-
Always charge what you’re worth, don’t short change yourself. A freelancing friend told me “if people aren’t negotiating with your first quote, you aren’t charging enough.” Fees are always safer than royalties, but of course royalties have that jackpot allure. Sure if you can do both and charge enough to pay the bills with the opportunity to make more down the road, that’s pretty ideal. I’d say royalties depends largely on who you’re working with. Do they have a successful track record of launching products, and a dedicated team to make it happen? Are they serious about it? Are you ok with putting in the work and not getting paid? Because that is a distinct possibility with royalties - other designers correct me if I’m wrong here, but I’d say getting paid on royalties is the equivalent of flipping a coin. 50% of products make it to market at best, and then their success there is a whole other story.
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As far as I know there is no “rule” for anything. It’s what your judgement is on the client.
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That’s a good point, soft goods are relatively easy to redesign and refresh. And depending on what it is it’s a relatively saturated market.
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I think this comes down to what you define in the contract. If you’re working for royalties, make sure you have a solid contract before you start any work.
I’d say bottom line: charge what you’re worth. Only go for royalties if you’re ok not getting paid. Make sure you ask for enough royalties to make that gamble worth it. And if you love the idea behind the project and it sounds fun, you have nothing to lose, go for it!