How to Calculate Your Wholesale Pricing

One of the most important aspects of selling your product is figuring out the best price you can sell it at. Moving your product from warehouse to customers means landing on a price that works for your business model financially but is also priced correctly for your customers. 

Finding the goldilocks pricing really comes down to understanding your costs, the competition, and market dynamics. Wholesale pricing will differ from your retail pricing as there are large volumes and retailers involved. 

Bulk-pricing is a crucial link in the supply chain as it ensures manufacturers cover costs and turn a profit with retailers getting room to mark up the price for customers. It’s about creating a stable business flow that allows you to crank up production and clear inventory quickly, with retailers benefiting from greater profit margins. 

Think of it as a business symbiosis that boosts sales, ramps up production, lets you reach a wider audience and, lastly, garners brand recognition and reputation that you couldn’t achieve on your own. 

So, let’s take a look at the breakdown of how to best calculate your wholesale pricing. 

Calculating Your Wholesale Price: A Step-by-Step Guide

Now that we’ve covered the benefits of wholesale pricing, it’s time to delve into the specifics and help you set a price tag that ensures profitability. Rely on our overview to guide you through the optimal process – one that’s fair to you and attractive to retailers.

Market Demand and Supply

First, get a clear read on your market. 

Here are some questions you can ask yourself to get started: 

• Is your product in high demand? 
• Who are you selling to? 
• Are there plenty of suppliers offering similar items? 
• How are the seasonal fluctuations? 
• Is your product unique, and if so – why? 
• What price points are you targeting? 
• What are the barriers to entry? 

Knowing these will help determine a wholesale price that reflects both your production costs and your product's value proposition.

Production Costs

Next, look into your core business information and add it all up. Get familiar with your numbers to find out what it takes to bring your product to market and then make sure it’s running profitably. This will mean looking into fixed and variable costs, total costs and break-even analyses to ensure you’re not operating at a loss.

Research Your Competition

Take a good look at what your competitors are charging and position your market rate accordingly. Getting a gauge of similar products will help you understand industry trends and work out strategies to stand out within the existing business space. Aim to strike a balance between competitive pricing and turning a steady profit. 

Adding Profit Margin

Once you’ve covered your costs and researched the market and competition, it’s time to think about a profit margin. In terms of revenue, what percentage are you comfortable with? Don’t throw any one number out on a whim – consider your business model thoroughly to determine how to keep you both competitive and profitable.

Offer Volume Discounts

Don’t hesitate to offer tiered pricing – the more a retailer buys, the bigger discount you offer. Retailers save money by buying in bulk, so this encourages them to order more, translating to steady sales and predictable revenue for you. On the flip side, volume discounts foster loyalty; customers appreciate the cost saving and reliability of a consistent supplier, leading to long-term partnerships.

Wholesale Pricing Methods

The price tag isn't just a number on a spreadsheet – it’s a proposition to all involved parties that reflects your commitment to fair profit and respecting the current market state. Thinking of a product in terms of the time and love you’ve put into it is understandable, but come opening day, you’ll need to have decided on a realistic figure. 

There’s a number of ways to go about this, and accurately figuring out your product’s worth comes down to choosing an adequate pricing strategy. So, here’s what you need to know on various takes on profitable pricing. 

Cost-Plus Pricing

A simple and straightforward approach, cost-plus pricing consists of adding a standard markup to the cost of production. It’s all about building your price from the ground up – you’ll need to gather your costs (like materials, labor, overheads) and factor in a profit percentage. Once you add them up, that's it – you’ve got your wholesale price. It’s easy to calculate and ensures a profit on every sale, but doesn’t necessarily reflect the actual value of your product nor does it take into account what competitors are charging.

Value-Based Pricing

Forget dollar signs for a moment and think about what problem your product solves. Does it make people’s lives easier? If so – there’s no such thing as objective value, only perceived value, meaning your product is worth whatever the customer is willing to pay for it. That’s the core of value-based pricing. It’s highly flexible and focuses on a unique value proposition. Premium quality, innovative solutions to specific pain-points or a strong brand reputation allow you to command a premium for the benefits you provide. While this may lead to higher profit margins, it requires a deep and thorough understanding of your target audience, so make sure you know the customer inside and out to appease their willingness to pay.

Keystone Pricing

Doubling down on the COGM (cost of goods manufactured) is a time-tested retail method that has become a standard in many industries. Ensuring a healthy profit margin at every stage of the supply chain, keystone pricing is easy to tally up and effective. There are, however, potential drawbacks – it overlooks demand and competition, which can lead to missed opportunities. Get to know all market factors to optimise sales and yield profitability.

The takeaway? An ideal pricing method doesn’t exist – they’re all determined by the specifics of your product, industry and business. Consider a combination of these approaches to find the sweet spot between profitability, market competitiveness and the value your product delivers.

Don’t worry if everything doesn’t fall into place instantly - it’ll be a gradual process, so feel free to experiment, analyse and adapt to the conditions in real-time. Bear in mind, this isn’t a one-time decision, and you’ll need to keep an eye on market fluctuations to keep your business competitive.

While it may sound complicated, wholesale pricing comes down to a very simple caveat – don’t undervalue your product or overplay your hand. Everything in between is up for discussion. With a little research and our tips on pricing strategies, you’ll figure out the right value proposition in no time.