Guide
How to Price Wholesale and Keep a Profit
Learn to calculate a wholesale price that leaves both you and your retail stockists with the margins they need to survive.
The core problem
The usual rule is wholesale = half of retail. It keeps the shop's price in line with yours, but only works if half your retail price still covers your cost and leaves you a profit. Work it out from the numbers.
The math: four prices, one cost
You start with what it costs you to make one unit: materials, labour, packaging, everything landed in your hands.
From that single cost, you now need four numbers:
- Wholesale price: what you will charge shops
- Your profit per unit: wholesale price minus cost
- Your direct retail price: what you charge customers direct
- Shop retail price: what shops need to charge to make their margin
When a shop buys from you at wholesale, it then needs to mark up *again* to cover its own overheads and leave it profit. That markup has to be enough. If it is not, the shop will not stock your product, or it will raise the price higher than yours and lose sales to your direct business.
A worked example
You make candles. Your cost per candle is $4 (wax, wick, fragrance, jar, labour, packaging).
You want to keep 40% on every candle you sell, whether direct or to shops. A shop that stocks your candles needs 50% margin to cover its rent, payroll, and other products.
Your direct retail price: You decide to charge $10 direct. Your profit is $10 − $4 = $6 per unit. That is ($6 ÷ $10) = 60%, which is higher than your 40% target. That is fine for direct sales; you have captured value.
Wholesale price: You offer the shop $6.67 per unit. Your profit is $6.67 − $4 = $2.67. That is ($2.67 ÷ $6.67) = 40%, your target.
Shop retail price: The shop buys at $6.67 and needs to make 50%. The maths: $6.67 ÷ (1 − 0.50) = $13.33. The shop must charge $13.33 to make 50% on a candle that costs it $6.67.
The problem: your customers pay $10, and the shop's customers pay $13.33. The shop is $3.33 more expensive than you are. It will lose sales to your direct business.
Three ways to fix the problem
The key tension: the shop's retail price ($13.33) ends up higher than your direct price ($10). The shop loses sales to you, or you lose the stockist.
You have three choices:
One: Lower your margin on wholesale. Take 20% instead of 40%. Price the shop at $5.00. Shop retail becomes $10.00, matching your direct price. You keep $1.00 per unit instead of $2.67, but the shop will stock you.
Two: Raise your direct price. If $10 is too low, raise it to $13.33 or higher. The shop can charge $13.33. You keep your full margin on both. This works only if customers will pay more.
Three: Find shops with thinner margins. Some work on 30% or 35% instead of 50%. Your wholesale price can stay at $6.67. At a 30% margin the shop charges $6.67 ÷ 0.70 = $9.53; at 35%, $6.67 ÷ 0.65 = $10.26. Both sit close to your $10. You both win, if the shop can survive on lower margin.
The wholesale pricing calculator tests each scenario with your numbers.
Should you offer bulk discounts?
Many makers offer a discount on wholesale if the shop orders more. $6.67 down to $6.00 for, say, 100 units. Does this make sense?
It makes sense only if the extra units and lower per-unit profit add up to more total profit than a smaller order at the higher price. Example: at $2.67 profit per unit, 50 units is $133.50. At $2.00 profit per unit (with a 10% discount), you need at least 67 units to exceed that.
More importantly: will the shop actually sell 100 units of your candles? If you offer a discount and the shop overorders, it will discount your product to move stock, and you lose. If the shop sells through fast, the discount is worth it.
Offer bulk discounts only to shops you trust to sell fast, and only if the extra quantity moves forward profitably for you. Never discount just to move stock you made; that is giving away margin.
Keep both numbers visible
The shop needs to see both the wholesale price and the shop retail price you expect. If you are supplying a shop, a price list should show:
- Cost to the shop (wholesale price)
- Suggested retail price
- The margin the shop makes
This makes it clear to the shop that you have done the math, and that you understand their business too. A shop that gets this approach is more likely to stock you and order again.
Put your wholesale prices, direct prices, and the margins on each in one sheet so you can see them all at once when a cost changes or you add a new product. The Back Office Kit's Products tab shows your price, margin, wholesale price and wholesale margin side by side, and its Line Sheet tab builds a wholesale price list from them.
