How to use the retail price calculator
- 1Choose whether you want to find a retail price from your cost, or the maximum cost for a target retail price.
- 2Enter your cost per unit, including materials, labour, packaging, inbound freight and import duty, or enter the retail price you are aiming for.
- 3Enter the margin you want to earn on your wholesale price.
- 4Choose keystone (the retailer doubles your wholesale price) or enter the retailer's margin.
- 5Read the full price ladder and the profit per unit for you and for the retailer.
How the price ladder works
A product sold through shops usually has three prices: what it costs you, the wholesale price you charge the retailer, and the retail price the customer pays. Each step adds a margin for the business taking the risk at that stage.
Your wholesale price comes from your cost and the margin you want. The retail price comes from your wholesale price and the retailer's margin. Both margins are worked out on the selling price at that step, which is how retailers and buyers usually talk about them.
Wholesale price = Unit cost ÷ (1 − Wholesale margin % ÷ 100) Retail price = Wholesale price ÷ (1 − Retailer margin % ÷ 100)
Keystone pricing
Keystone means the retailer doubles the wholesale price, which gives the retailer a 50% margin (a 100% markup). It is common in gift, fashion, homeware and independent retail, though many stores now ask for more than keystone to cover rising rents and card fees, and some product categories, such as electronics, run on much thinner retail margins.
Ask your retail buyers what margin they need before you set your wholesale price. If they need 55% or 60% and you priced for keystone, the shelf price will end up higher than you planned.
Keystone retail price = Wholesale price × 2
Working back from a target retail price
Customers compare shelf prices, so many brands start with the retail price their market will accept and work backwards. Take the retailer's margin off the retail price to get the wholesale price, then take your margin off that to get the most you can spend per unit.
If your real cost is above this figure, you need a cheaper way to make or ship the product, a lower margin, a different retail channel or a higher price point.
Wholesale price = Retail price × (1 − Retailer margin % ÷ 100) Maximum unit cost = Wholesale price × (1 − Wholesale margin % ÷ 100)
Selling direct as well as wholesale
If you also sell on your own website, charge customers the same retail price your stockists use. Undercutting your retailers online is a common reason shops stop reordering. Selling direct at retail price then earns you both margins on each sale, which helps pay for your own shipping and marketing.
Local rules on retail prices differ. In the UK and EU, shelf prices for consumers normally include VAT, so the retailer will take VAT out before applying its margin. In the US and Canada, sales tax is usually added at checkout on top of the shelf price.
Worked example
A candle maker spends $12 per candle on wax, jar, wick, label, labour and shipping. She wants a 50% wholesale margin, and her stockists use keystone pricing.
| Unit cost | $12.00 |
| Wholesale price | $12 ÷ (1 − 0.50) = $24.00 |
| Retail price | $24 × 2 = $48.00 |
| Maker's profit per candle | $12.00 |
| Retailer's profit per candle | $24.00 |
| Retail price ÷ unit cost | 4× |
The candle sells for $48 in shops. Working backwards, if she wanted a $60 shelf price with the same margins, she could spend up to $15 per candle ($60 ÷ 2 = $30 wholesale, × 0.50 = $15).