It is easy to get confused when thinking about the concept of wholesale versus retail pricing. Selling retail means that the producer is directly providing the product to the consumer. If you sell wholesale, it means that the supplier is providing large quantities of the product to a retailer or industry (a middle man). That middle man will then sell it to the consumer. Typically, wholesale prices are lower than retail prices.
How to price wholesale items
It is important to set your prices fairly. Set it too high, and customers will not want to buy from you. Set it too low and your business won’t prosper. It is not a good strategy to price the wholesale products at exactly half that of the retail price. If this happens, your wholesale price will be too low for you to make a profit. You deserve to be paid for your products, whether they be your own creation or factory produced. If it turns out that you are not making a profit on your wholesale price, it might not be possible to do so with that particular product.
What to consider with pricing
You are the one who knows your business the best. What will it cost you to make the product? What will the materials cost? How long will it take to produce? If it is a custom or handmade item, the costs for materials, labour and amount of time will all increase. These are all factors that you must consider when setting your prices. In addition to these factors, you must also decide how much will constitute a fair profit for yourself. When you’ve come up with a final wholesale price, you can double it to get your retail price.
Wholesale pricing formulas
The final formula that you come up with is up to you. It is what you think will suit your business the best. Some examples of pricing formulas include:
- Materials + Labour + Fixed expenses + Profit = Wholesale and Wholesale x 2 = Retail
- (Materials x 3) + Labour = Wholesale and Wholesale x 2 = Retail
Producing large quantities of products for wholesale can be a costly operation. Keep this in mind when you are making decisions relating to budgeting and pricing for your business.
As your business progresses, perform several assessments to determine whether your pricing strategy is working. Are you receiving the revenue that you had hoped for? Are your customers satisfied? Are your employees happy with the working conditions and wages that you are paying them? If you answer ‘no’ to any of these questions, it is likely that you need to make some adjustments to how you are conducting your wholesale business. Perhaps you need to pay your employees more or reduce some variable expenses. As well, you do not need to offer to wholesale all your products. You can pick and choose certain products lines for wholesale, perhaps the ones that you can obtain the most easily.