The wholesale to retail markup is the process companies use to determine how much they will charge end users for their products. Markup from wholesale to retail can be calculated by starting with the wholesale cost of a product and then figuring out the retail price at which most customers are likely to buy that product. The price you decide to sell it for might change depending on several factors, such as how much your competitors charge, what customers want, and how important they think the product is to them. Markups from wholesale to retail are often used by businesses that buy items at wholesale prices and sell them to end customers. These markups are used to set prices that bring in enough money and make a profit.
1. Find out about your market
Find out your target market and where you fit in that market before setting prices for your products. For example, would you say that your brand is modern, cheap, or a designer brand? This also changes how your audience sees you, which changes how much you can charge.
When you study, don’t forget that one of your competitive advantages is having a lower price point. Keep an eye on your break-even point; if you need help figuring it out, you can find the method here. When doing market research, you should think about these things, like whether the customers you want to attract are more price-conscious or if they want a high-end, high-quality product.
2. Figure out how much it costs to make your goods.
The cost of making or buying a product is the cost of goods manufactured (COGM). This cost includes the cost of the raw materials, the cost of labor, and any other costs that are needed to get the product into stock and ready to sell, such as the cost of shipping and handling.
3. Set your price for wholesale.
When figuring out how much to charge wholesale customers, start by multiplying the cost of each item by two. This will make sure that your profit margin at the wholesale level is at least 50%. When a business sells an item, it makes a gross profit. This is called the profit margin.
In the clothing business, direct-to-consumer retailers usually aim for a profit margin of 55–65%, while wholesale retailers usually aim for a profit margin of 30–50%. (There are other times when a “markup percentage” refers to a margin.)
Make a plan for your wholesale customers’ prices:
Now that you know more about the formulas used to figure out prices, it’s time to develop your pricing strategy. Make a spreadsheet with a list of your items organized by the style number and name, as well as columns for the cost of goods, wholesale price, retail price, and retail margin.
With the help of the above formulas, make a costing chart to easily add numbers whenever you need to set a price for a new product.
Suppose you want to use Shopify to sell wholesale items to other businesses. In that case, you can either sell on an online marketplace or add the wholesale channel to your online shop to make a storefront that can only be accessed with a password.
