Wholesale Pricing Tips
Are you planning on creating your own Shopify site and perhaps build a business out of it? Well, then you’ve probably questioned yourself on how to consider the pricing for your products sourced via wholesale — if so, then you’re in the right place!
It is important for every entrepreneur to properly determine the price of their product, whether it be wholesale or retail. Wholesale pricing is not only a business, but an art form that involves strategy, competition, and proper execution. Don’t be overwhelmed however, as we’ll be discussing how to properly manage wholesale pricing as well as giving advice along the way!
Pricing your wholesale products for a profit
When you’re deciding the wholesale price, you must account for all the time, labor, employees, materials, etc. that were involved in the production of the product. In other words, you should charge a price somewhat higher than the cost it took for the production. At the same time, you should avoid going overboard with your profits; keep enough to help expand your business but also reasonable enough to ensure that the retail price isn’t too expensive.
Once you’ve figured out what the wholesale price should be, double that price to create your retail price. Always keep in mind that retailers are expecting to build a profit too; therefore doubling the wholesale price is suggested by most. You can also use the retail price to sell the product yourself on an ecommerce site.
Determine your pricing formula
You may be wondering as to how you can create an effective formula for the wholesale pricing. As I said, you must create a price that accounts for all the hard work invested into the production. This includes paying your employees for labor, the cost of materials used to create your product, as well as things like your rent, monthly bill, etc. And let’s not forget that you must earn a profit in order to reinvest in your business!
Here, we’ll list a couple examples of pricing formulas created by other entrepreneurs:
- Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail (from Etsy )
- (Labor + Materials) x 2 = Wholesale x 2 = Retail (made by LaunchGrowJoy Blog)
- (Materials x 3) + Labor = Wholesale x 2 = Retail (made by CreativeArtsConsulting)
A Few Other things to keep in mind
Consider what you would feel comfortable paying an employee per hour, and figure out how many of your products you can create within an hour to estimate the labor cost per product.
It is also ideal to look into the competitor’s price when setting the price for your product. If the price of your product is way higher than your competitors; chances are that you will lose customers who prefer cheaper products.
All in all, the core things which you should consider are that you’re making a profit, the retailers are making a profit and that the customers are enjoying your product. That way, everyone is happy!