Wholesale Pricing: Set a Price That Works for You and the Retailer

A wholesale price has to work at two levels: it must cover your supply costs and leave enough room for the retailer to resell the item. Simply halving a recommended retail price can hide an unprofitable deal. Start with the costs and margin requirements on each side, then check whether the resulting retail price is realistic.

Start with the cost of supplying one unit

Include the costs you incur to deliver a wholesale-ready item: production or purchase cost, packaging, inbound freight and other relevant unit costs. Keep fixed overhead separate unless you deliberately allocate it into the unit cost. Do not charge the same overhead again later in the calculation.

Suppose your cost is $24 per unit and you want a 40% gross margin on the wholesale sale. Wholesale price = cost ÷ (1 − margin), so $24 ÷ 0.60 = $40. Your gross profit is $16, which is 40% of the $40 selling price.

Check the retailer’s economics

If the retailer buys for $40 and sells for $80, its gross profit is $40 and its gross margin is 50%. Your 40% wholesale margin and the retailer’s 50% retail margin describe two different transactions. Neither percentage is a markup on cost.

A retailer that wants a 60% margin on the same $40 purchase cost would need a $100 selling price: $40 ÷ 0.40. That arithmetic does not establish that customers will pay $100; it identifies a pricing constraint to investigate.

Test a volume discount before offering it

Reducing your wholesale price from $40 to $36 while cost remains $24 lowers gross profit to $12 and margin to 33.33%. The order may still make sense if larger volume reduces handling or production costs, but the original 40% margin no longer applies.

At $16 contribution per unit, 100 units generate $1,600 before fixed costs. At $12, you need at least 134 units to exceed that amount. Confirm production capacity, payment terms and additional fulfillment costs before assuming volume makes up the difference.

Questions to resolve before quoting

Does the price include freight? Are returned or damaged goods credited? Do payment processing and sales commissions apply? These terms change the effective amount you keep.

Should retail price be exactly double wholesale? Only if the resulting retailer margin and market price suit the product. It is a convenient example, not a universal pricing rule.

Calculate your own scenario

Use the Wholesale Price Calculator for your target price, then check alternative selling prices with the Profit Margin Calculator. Keep one currency and a consistent tax basis throughout.

Related reading

Continue with Ecommerce Profit: Build a Complete Cost Model for Each Order for another part of the calculation.