{"id":2720,"date":"2017-07-12T08:18:56","date_gmt":"2017-07-12T08:18:56","guid":{"rendered":"https:\/\/www.nowinstore.com\/blog\/?p=2720"},"modified":"2026-08-27T02:28:30","modified_gmt":"2026-08-27T02:28:30","slug":"retail-wholesale-pricing-strategy","status":"publish","type":"post","link":"https:\/\/www.nowinstore.com\/blog\/retail-wholesale-pricing-strategy\/","title":{"rendered":"Retail & Wholesale Pricing Strategy"},"content":{"rendered":"\n

Most makers who get into wholesale underprice, and they almost always do it the same way: they add up materials, add a bit for their time, double it, and call that the wholesale price. Then they wonder why a good month leaves them with no money.<\/p>\n\n\n\n

The formula that works is not complicated. Getting the inputs right is where it goes wrong.<\/p>\n\n\n\n

The wholesale pricing formula<\/h2>\n\n\n\n

materials + labour + overhead = breakeven<\/strong>
breakeven \u00d7 2 (or 2.5) = wholesale price<\/strong>
wholesale price \u00d7 2 = recommended retail price<\/strong><\/p>\n\n\n\n

That is the whole thing. Everything below is about calculating each input honestly, because that is the part people get wrong.<\/p>\n\n\n\n

Working out each input<\/h2>\n\n\n\n

Materials \u2014 per unit, not per batch<\/h3>\n\n\n\n

Every raw material that goes into one<\/em> finished item. If you make beaded necklaces, that is the beads, the thread, the clasp, the conditioner, the packaging, the swing tag. Not “roughly what a batch costs” \u2014 the actual per-unit figure.<\/p>\n\n\n\n

If you work with a manufacturer, get their minimums, price breaks and lead times in writing before you price anything. A price break at 500 units changes your maths completely, and you cannot plan around a number you half-remember from a call.<\/p>\n\n\n\n

Labour \u2014 including your own<\/h3>\n\n\n\n

Direct production time only. If someone is paid $20 an hour and assembles one bracelet an hour, labour is $20 per bracelet.<\/p>\n\n\n\n

The mistake here is founders costing their own time at zero, or at some apologetic rate below what they would pay an employee. Your time is the most expensive input in the business. Cost it at what you would have to pay someone to replace you, because eventually you will.<\/p>\n\n\n\n

Overhead \u2014 the one everyone forgets<\/h3>\n\n\n\n

Everything indirect: rent, utilities, equipment, insurance, software, advertising, admin salaries, platform fees. Anything you pay whether or not you make a single unit.<\/p>\n\n\n\n

To get a per-unit figure, add up a month of indirect costs and divide by units produced that month. $10,000 of overhead across 1,000 necklaces is $10 per necklace<\/strong> \u2014 before a single bead.<\/p>\n\n\n\n

Recalculate this when volume changes. Overhead per unit falls as you make more, and rises sharply in a quiet month.<\/p>\n\n\n\n

A worked example<\/h2>\n\n\n\n
\n
Materials<\/td>$12<\/td><\/tr>\n
Labour (1 hr @ $20)<\/td>$20<\/td><\/tr>\n
Overhead per unit<\/td>$10<\/td><\/tr>\n
Breakeven<\/strong><\/td>$42<\/strong><\/td><\/tr>\n
Wholesale price (\u00d7 2)<\/td>$84<\/strong><\/td><\/tr>\n
Recommended retail (\u00d7 2)<\/td>$168<\/strong><\/td><\/tr>\n<\/tbody><\/table><\/figure>\n\n\n\n

At $84 wholesale on $42 of cost, you are running a 100% markup and a 50% gross margin. Those are the same transaction described two ways, and confusing them is the single most common pricing error \u2014 so it is worth being precise about.<\/p>\n\n\n\n

Markup and margin are not the same number<\/h2>\n\n\n\n

Markup<\/strong> is measured against your cost<\/em>:
\n(price \u2212 cost) \u00f7 cost<\/code> \u2192 ($84 \u2212 $42) \u00f7 $42 = 100%<\/strong><\/p>\n\n\n\n

Margin<\/strong> is measured against your price<\/em>:
\n(price \u2212 cost) \u00f7 price<\/code> \u2192 ($84 \u2212 $42) \u00f7 $84 = 50%<\/strong><\/p>\n\n\n\n

Same money, two figures. If a buyer asks what margin they will make and you quote them a markup, you have just overstated their return by a factor of two \u2014 and they will notice.<\/p>\n\n\n\n

Rough conversions worth memorising: a 50% markup is a 33% margin. A 100% markup is a 50% margin. A 150% markup is a 60% margin.<\/p>\n\n\n\n

Keystone pricing, and why retail doubles it<\/h2>\n\n\n\n

Doubling the wholesale price to reach retail is keystone pricing<\/strong>, and it is the default expectation across most physical retail. When a buyer asks for your wholesale price, they are mentally doubling it to see whether the resulting shelf price is credible for your category.<\/p>\n\n\n\n

This is not the retailer taking advantage. They carry rent, staff, shrinkage, unsold stock and the cost of introducing your brand to people who have never heard of it. Fifty per cent gross margin is not fifty per cent profit for them either.<\/p>\n\n\n\n

Two consequences worth planning for:<\/p>\n\n\n\n