This blog post was originally published in 2014, and during that time it has proven to be one of our most popular posts. Since wholesale pricing is such an important topic, we thought it would be a good idea to revisit this piece and update with some new resources. Enjoy!
Wholesale Pricing Guidelines
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; you need to price for profit at the wholesale rate.
This is important 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.
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. This is especially tricky these days as cost of living and inflation are on the rise. Be sure to check out our recent blog post Balancing Profitability and Fair Wages In a Small Business for more information on this important topic.
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:
- Labor: Labor is not negotiable. Build labor into your price, so you can easily hire someone in the future.
- Cost of goods and materials used to create your product, including tools.
- Overhead: your rent, utilities, supplies, phone, etc.
- 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.
Wholesale 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:
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:
Materials + Labor = Item Cost x 2.2 = Wholesale x 2.2 = Retail
4) Pricing formula from Marlo at Creative Arts Consulting:
(Materials x 3) + Labor = Wholesale x 2 = Retail
For even more information about wholesale pricing, be sure to check out this blog post: Wholesale Product Pricing For Your Creative Business. This Q+A style post is filled with real life questions from creative business owners in our community and expert advice from Lela Barker, the owner of Lucky Break Consulting.
Additional Wholesale Resources
- Wholesale Product Pricing For Your Creative Business
- 10 Tips for Wholesaling Handmade Items
- Creating a Wholesale Website — And How to Do it Right
- Setting Up Wholesale Accounts on Shopify
Looking for Support?
We are Shopify Experts for Creative Ecommerce Shops; we can help with 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.
If you have any questions for us or advice to share, I’d love to hear from you in the comments here!
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