Wholesale Pricing Tips and Formulas

If you have questions about wholesale product pricing, boy do we have answers. Visit Aeolidia to get four wholesale pricing formulas PLUS a huge 38 page guide that will give you all the answers and save you tons of research. Skip the trial and error and start out with pricing that will help your business grow!2016 update! How to find the perfect price for your product.

It’s been two years since I wrote this post, and I know you’re looking for more information than this. Do you feel like these cookie cutter formulas don’t do justice to your unique business? I agree. Lela Barker is here to shed some light on this for you, and she says:

Pricing strategies are far too nuanced and complex to be successfully served by simple calculations. Multiply by this. Add this. Blah blah blah. That approach doesn’t work and, more often than not, it leaves money on the table. Unless you’re selling non-branded commodity products, then pricing by straight formula is naïve and dangerous. Do you need to know your costs? Absolutely. Do they form the alpha and omega of pricing? Absolutely not.

 

Shipshape Collective Freebie

Lucky Girl's Guide to Product Pricing

Lela Barker of Lucky Break Consulting has generously let me share her product pricing guide with you here. It is thorough.

Price with confidence, boost your bank account, and build your brand! Lela Barker has graciously offered to share her extremely thorough pricing guide with you for free. I can’t overstate how hugely helpful this guide is. It’s 38 pages long and is infused with Lela’s no-nonsense, actionable advice. You will really understand the reasons behind the strategy and be able to make your own confident decision about how to price in a way that will help you move your business forward.

Here are some wholesale product pricing formulas

While different people have different pricing formulas they use, one thing is pretty solid across the board when it comes to wholesale pricing for handmade products:

Price for profit at the wholesale rate

You need to price for profit, and you need to price at the wholesale rate, because ideally that’s how you’ll be selling most of your products.

Don’t come up with your retail price, then cut it in half for wholesale – that’s very likely to make wholesale prices unsustainably low.

This means that when planning your pricing, you first need to come up with a wholesale price that pays you for your time, labor, materials, overhead, employees, etc. This price should have profit built into it so that you are able to not only stay afloat, but grow your business.

Once you’ve set your wholesale price, double that price to create your retail price (“suggested retail price” to your wholesale customers). When selling the product yourself on an ecommerce site, use that retail price yourself.

What to include in your pricing formula

I had the pleasure of listening to Marlo Miyashiro of Creative Arts Consulting speak at School House Craft about pricing last fall. Marlo says:

My advice to new creative entrepreneurs has always been to structure your pricing so that – at wholesale you are doing back-flips over your prices every time you sell even ONE of them. Then, double that price to arrive at your true retail price.

When pricing, Marlo suggested we consider:

  1. Labor: Labor is not negotiable. Build labor into your price, so you can easily hire someone in the future.
  2. Cost of goods and materials used to create your product, including tools.
  3. Overhead: your rent, utilities, supplies, phone, etc.
  4. Profit: the margin needed to reinvest in your business. Without profit, you can’t grow, hire, or even take a break from your business.

For labor, consider what you would feel comfortable paying an employee per hour, and work out how many of your products you can make in an hour to figure out labor costs per product.

Even if you don’t plan to sell wholesale, Marlo believes that you should still follow this pricing strategy, as it keeps pricing fair within your industry.

She also had the great advice that if there is something you don’t yet have for your business, but you plan to have it in the future, such as a studio space, factor the future studio rental cost into your overhead so you can make that money, and so you will still be making profit once you’re paying for the studio.

Example pricing formulas

Marlo scoured the web for some pricing formulas for handmade goods, and also gave us her personal formula. You can see that these are similar, but use different methods to arrive at reasonable prices.

1) Pricing formula from Danielle on the Etsy blog (read article):

Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail

2) Pricing formula from Andreea at Launch Grow Joy (read article):

(Labor + Materials) x 2 = Wholesale x 2 = Retail

3) Pricing formula from Mei at the Pragmatic Designer (read article):

Materials + Labor = Item Cost x 2.2 = Wholesale x 2.2 = Retail

4) Pricing formula from Marlo at Creative Arts Consulting (read article)

(Materials x 3) + Labor = Wholesale x 2 = Retail

If you have any questions for us or advice to share, I’d love to hear from you in the comments here!

Grab the guide

 

Shipshape Collective Freebie

Lucky Girl's Guide to Product Pricing

Lela Barker of Lucky Break Consulting has generously let me share her product pricing guide with you here. It is thorough.

Looking for a team to design your Shopify website?

We can help with both the retail and wholesale sides of your Shopify website. Take a look at our design portfolio here, and learn how we help people sell wholesale on Shopify here.

We have more posts about selling wholesale here.

About the Author

Hello, I'm Arianne! I am the head storyteller, idea hatcher, and yaysayer here at Aeolidia. I started making websites for friends in 1997, and never lost interest in building online homes for fascinating people. I have a great boss (me!) and I'm unafraid to play hooky to head out on an adventure. Some day I'll tell you about the time when, as a marine biology student, I was bitten by a baby elephant seal.

View more articles written by Arianne >

45 comments
  1. What a great article! Thanks so much for including my formula as well…

    • Thanks, Andreea! Pricing can be so hard to get right. I think it would probably be pretty simple if we could keep emotions out of it.

      • Ophelia says,

        Glad I found this site; great article. However, I do have a question. For wholesale pricing, do I factor what it costs me to ship my products from China?

        • This post is about handmade goods, so doesn’t account for shipping from China. Thanks for stopping by!

          • We make handmade goods in China too!! ;)

            @Ophelia, I run a social enterprise in China that’s looking to expand into wholesale. Though I’m not an expert, I don’t include the shipping costs into the wholesale price. I have a sliding scale for shipping costs for wholesale buyers- for small orders, the client pays for the shipping. For mid-size orders (where my profit is higher), then we split shipping. And for large orders (where I have high profit), then I pay for shipping.

  2. this is hugely helpful – thank you. one of the things I still can’t seem to wrap my head around is the ‘labor’ number in these equations. time is money but I how much?

    • Hi Elizabeth! Yes, it’s definitely hard to decide how much to pay yourself. An easier way to think of it would be to imagine you became so successful that you had to hire an assistant to help you with production work. What would you pay her per hour or per piece? That’s your labor cost!

      Then, when this dream scenario does come to pass, you don’t need to raise your prices to be able to afford your worker, it will already be included in your pricing formula.

  3. this is a great article, but i was wondering does the same thing stand for selling cell phone cases? I also sell jewelry and have struggled with getting customers to buy them. I buy them wholesale and I sell them individually. Is there a formula on how to price these? I want to see if I am over or under charging, as my partner and I keep going back and forth on this issue. The person we get our jewels from is located outside of the us (dubai) to be exact. CAN YOU PLEASE HELP ME?????

    • Hi Andria,

      If you are making the cell phone cases yourself, and selling them to wholesalers who will then sell them to their own customers, yes, this article should help you. If you ARE the wholesale customer, buying them from someone else and selling them to your own customers, that’s a different situation, not covered in the article above.

      • Yes, we are in fact the wholesale customers selling them to customers. The same thing applies to the jewelry.

        • It would be interesting to look at pricing from the angle of the wholesale seller someday! I’m also interested in your suggestion about showing some example math, and may create a future post about that. Thanks for stopping by!

  4. I also wanted to know is there a way to use an example with numbers? Also how would we be able to pay ourselves being that its not just a one man band?

    • I’m not sure how your business works, so unfortunately can’t help with numbers or advice on paying yourselves. If you aren’t turning a profit, it may be worth seeing if your city has small business support services. Maybe the small business association has a chapter in your city? http://www.sba.gov/

  5. Arianne,
    Purchasing wholesale comes with rules that we all must sell the product at their suggested retail. What happens to the costs of packaging, labor costs, overhead for one’s business? I have seen stores raise their prices but is that fair when we’ve been told the retail?

    • Good question, Bee, and the reverse of my article – pricing from the wholesale customer’s perspective. It would be interesting to look at pricing from the angle of the wholesale seller someday!

  6. David says,

    Dear Arianne,

    Thank you for the interesting article, I didn’t realise that there were different wholesale mark ups for different territories.

    Here in the UK it is generally accepted to work to a 2.5x mark up on the wholesale price to get to the retail price (e.g. a card set retailing at £20 set would wholesale at £8.00).

    In addition, larger retailers work to 2.7-3x mark up, meaning you have to reduce your wholesale price (reducing profit) to keep the RRP constant. Much higher than the 2/2.2 mark up you work to in the US.

    I often wonder if there are other differences between how the US and UK work with wholesale? Do any spring to mind?

    Thanks in advance,
    David

    • Thanks for reading, David! I am not very informed about how wholesale works in the UK, but it’s an interesting question.

  7. Sulava says,

    Thank you for the wonderful article. I was wondering if you could help me a bit more since my case is a bit different. I import my products from Asia and planning to sell wholesale. How do I price my product since there are more than 100 little item and there will be freight charges added.

    Thank you!

    • Hello Sulava,

      I believe you could use any of the formulas above, including the cost you pay for shipping as part of the calculation.

  8. Ricky Moss says,

    Hi Arainne

    We are a newly established Export/Import company based in Indonesia. We purchase our goods(food/beverages/furniture/computer appliances/textiles+clothing) and a host of other items from Indonesian Wholesalers/Distributors, thereafter, will export to South Africa. Since i am new at this, can you please advise as to how i go about raising markup prices, bearing in mind shipping costs/duty taxation etc for export purposes. The current formula we use is based on the USA Dept of Interior (NACS Pricing for reselling).

    Another query i have is if this is a generic pricing formula markup percentage formula which is used in Indonesian markup pricing.

    Thanks for a great insight in your blog!

    Regards.

    Ricky

    • Hello Ricky,

      This article is focused on setting wholesale pricing if you created handcrafted goods. I am not sure what would work best for your particular situation.

  9. HI. I’m sort of flabbergasted by this. If I use the labor+materialsx2=itemx2=retail.. that makes a pair of earrings I make wholesale at $70 and $140 at retail and that just seems nutters! Who besides celebrities are going to pay $140 for a pair of handmade brass earrings? Who can afford that? And what store besides some fancy shop in LA is going to buy a small pair of earrings for $70 wholesale price? It seems so unrealistic. There are a lot of small businesses, such a wide variety of venues for doing business as an artist and it seems like these formulas are only meant for places where people are wealthy and can afford to spend a lot of money for “wants”.

    • Hello Gemma,

      There are two ways to approach the pricing formula. One way is to raise your prices, the other is to lower your costs. If raising your prices doesn’t make sense, perhaps there’s a way to lower your materials costs, speed up production, or lower your expenses?

      These formulas are meant to make sure you’re paying yourself for your work, so if you can’t raise prices or lower costs, you may find yourself having a very hard time breaking even.

      Jewelry is a luxury purchase for everyone – jewelry is a treat, not a necessity, and jewelry pricing can vary greatly. You don’t need to be a celebrity or a ritzy shop in LA to find the value in $140 handmade earrings. There are many handmade earrings out there that cost much more. Your earrings may be something that people save up for or gift to others. Remember that you aren’t your own customer.

      I hope this is helpful!

  10. I sell digital download printables. I’ve noti many sellers price these on Etsy at $5 for an 8×10. So if I do that, my wholesale price would probably be $2.50 which seems like nothing. It takes time and software and skill to make a printable so $2.50 doesn’t make me do backflips :-) I often feel I should go higher like $8 or $10 but I’m not seeing evidence that the market will bear that price. I’m also new and don’t have a lot of reach yet. The idea with printables is that once they’re made I can sell thousands with practically no effort. But that’s not happening anytime soon. Thoughts? Should I price at $5 because that’s common (and many lovely printables are available for free online) and just shoot for a huge quantity of printables to sell? Or focus on custom work and/or start selling tangible prints that I mail out and charge more? Thoughts?

    • Hello Sarah,

      These are all great questions with no easy answers. My wholesale article, above, won’t apply exactly to you, because it’s about handmade items – items which must be created for every sale. You’re right that yours are different, as you get to make it once and then theoretically sell it forever with no further production work. So your pricing formula would be different than the ones above. It sounds like volume is your key to growth, and our Pitch Kit may be able to help you get the word out:

      http://aeolidia.com/pitch-kit/

  11. This article is very helpful. I run a ethical textile and handmade goods company. We are in the beginning stages and every little piece of information is super helpful.

    Thanks,

  12. Johan says,

    Great articles! Got a lot of useful information on all of them! I have one doubt though: when you talk about “doing back-flips over your prices every time you sell even ONE of them”, what do you mean? Does this mean double the price of production cost should be the wholesale price? Thanks!

    • Hello Johan, by that, I believe that Marlo means that you should be happy with your pricing per product. You shouldn’t depend on huge quantities of orders to feel like you’re being paid for your work and time.

  13. J Walton says,

    I have recently started a handmade caramel/candy company where we hand stir, hand cut, hand wrap, hand label, and hand package all of our products. The problem is this all takes a great deal of time. Using the formulas above, I realized that we are selling our products retail what we should be selling wholesale. Example, a box of 24 caramels, we currently sell at 14.99 a box retail. But using the formulas above we should be selling them at 11.XX wholesale and 22 retail but that seems so high for a box of caramels. Because we do everything by hand, our labor forces higher costs. How can we get around that or charge reasonably and still make money?

    • Hello J!

      $14.99 sounds super cheap to me for a product that is hand stirred, cut, wrapped, labeled, and packaged! I would not be surprised at all to pay $22 for a box of caramels that had so much personal care put into it.

      So your choice is either:

      1) Really promote, explain, and market how intensively you craft your caramels, make that the selling point, and ensure that people understand the value you offer. People that value handcrafted treats will gladly pay what your work is worth.

      2) Find a way to quit doing some of these things by hand so you can lower costs and labor and charge the lower price.

      Ultimately, understanding your unique selling proposition will guide you in which is the right choice for your particular business, and you can learn more about that here:

      http://aeolidia.com/unique-selling-proposition/

  14. Sheriff says,

    Hi Arianne.

    Thanks for this great article! I have a few questions for setting up my business and I was wondering if you can help clear this up for me. I will be a wholesaler/distributor to retail for a very unique product with zero local market competition. That’s why I’m setting the price based on cost.

    The cost of will be around $2 per piece. What would be a healthy percentage for the profit margin? Is there a good formula to calculate this? I do presume though that the retailer would not be able to sell this for more than $10.

    Would appreciate your feedback

    • The article above is meant for handmade businesses, where you are buying supplies and doing the labor. I’m not sure what a good profit margin for a distributor would be.

  15. thant zin says,

    hi, interesting and helpful discussion. can help me with how to identify minimum quantity for whole sale ?

  16. Thanks so much for this. The varied formulas are a great help

  17. Hi, great article. I would love to know your opinion on my situation. I have a leather goods business and on my larger items, $200-$600 price ranges. if I price them the way your suggesting (which is what I have been told is standard) my prices are too expensive and very little people will buy them as its above the market value for comparable items you can buy else where. So I have my prices set to move product direct to consumers and in two years it’s been working great. But as I am wanting to grow the business this year my plan is to get into more retail shops. But we are not able to do 50% off of these prices for the larger items and make the profit that is needed to make it worth it. So currently we have just been offering our wholesale prices at what we need to make money which comes out to like 60/40. Is this acceptable in the market or will this greatly effect how many retailers want to purchase from me. Thanks so much for your response. :)

    • Hello Nathan,

      My first instinct is to tackle this problem behind the scenes – can you lower the cost or your materials (without sacrificing quality, of course!), increase efficiency, lower overhead costs, or find another way to create more profit without raising prices? If not, and you have all of your production costs as lean as can be, that’s when you need to look at increasing your prices.

      You are right that wholesale customers aren’t going to be thrilled with less than their standard markup. You may find that they then mark your products up higher than you would suggest, and then you’re in direct competition with them on pricing, which isn’t a great situation for them. You’ve been trying to compete based on price with your business so far, and it seemed to be working well, but now you’ve hit this problem growing via wholesale that shows a hole in your pricing strategy.

      The upper limit on pricing for luxury leather goods is much higher than your current price point. This doesn’t mean you should raise your price sky high, but do remember that you offer something special – a handmade in America product. If you are speaking to your perfect customers and communicating what you do properly to them, you have room to raise prices to move to this next step with your business. Best wishes!

  18. DM says,

    Hi! Thanks for the article…very helpful, but I still have a question. We figured our cost and have 3 different boutiques we’re ready to negotiate with. Two of the stores are in high-end boutiques selling items close to $100 and the other location is in a regular plaza selling items for around $60. My question is, If I know the store is going to sell my item for a higher price, is it fair for me to raise my wholesale price?
    Another side note question… Is it acceptable to ask for a minimum purchase during negotiatiation?
    Thanks!!!

    • Hello! Thanks for stopping by. No, you don’t want to offer different prices to different wholesale clients. It’s your wholesale customer’s business what they charge, and your business to make sure you’re being fairly compensated for your work. If a wholesale client can make more money off of your work, good for both of you – that means that they will be happy to buy from you. Yes, you can absolutely have a minimum purchase amount, and this is a standard thing to do.

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  20. erin bosenberg says,

    Hi Arianne. I am just starting a new business in South Africa designing scarves and pocket squares. My question is about pricing wholesale locally within South Africa versus pricing wholesale for another market – the US or Europe. Should my wholesale price change (go up slightly) when selling to a US or European market? I am thinking about a change in currency value as well as my shipping costs. Any advice would be greatly appreciated.

    • Hello Erin,

      Thanks for stopping by! I’m not sure what the answer to this is, but I would recommend asking in our Facebook group for creative product-based businesses: https://www.facebook.com/groups/aeolidia/ – there may be other business owners there with experience in this area.

  21. Kiera says,

    The MOQ will depend on the wholesaler. I run a couple of gyms and was giving towels with annual memberships. I started buying 50 pcs at a time then when it took off I started 500 pcs at a time which lowered my cost per piece by 40%. It is all a numbers game. I went from giving them away to selling them at my gift shops. If anyone is interested in a new product you can try Turkish Peshtemal Towels they are very popular nowadays. Here is the best wholesaler I found so far.
    https://fabricdome.com/

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  23. Shaik says,

    I am in a strange situation my boss told me to research for our new product what price is better for our product.

    Deficulties
    1 i dont know cost
    2 we dont gave similar competition
    3 we have only product in this division so we have see all employees storage and transport

    Kindly alart me on
    Sheikazm@gmail.com

    • That does sound difficult! I think I’d see if I could get more information from my boss if I was in your position. Best wishes!

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