If you sell both wholesale and direct-to-consumer, your wholesale markup needs to leave enough room for your retail partners to mark the product up again and still sell at a competitive final price.
The pricing chain to think through
- Your cost to produce or source the product
- Your wholesale price to retail partners, which needs to cover your costs plus your own margin
- The retailer’s typical markup on top of your wholesale price, commonly 2 to 2.5x in many retail categories
- The resulting final shelf price, checked against what the market will actually bear
A common mistake
Setting wholesale price based only on your own desired margin, without checking what final retail price it forces once your retail partners apply their standard markup, can price your product out of the market before it reaches a shelf.
Working backwards
Start from a realistic final retail price, work backwards through the retailer’s typical markup to find your maximum wholesale price, then check whether that still gives you the margin you need.