Wholesale vs Retail Pricing for Makers
If you sell your products directly to customers and also want shops, boutiques or galleries to stock them, you need two prices: a wholesale price for businesses that buy to resell, and a retail price for the end customer. Getting the relationship between them right is one of the most important pricing decisions a small product business makes. If your retail price is too close to your wholesale price, stockists cannot make money selling your work. If your wholesale price is too low, every wholesale order costs you. This guide explains the usual formulas and the practical points around them.
Definitions
- Cost is what it takes to make one item: materials, packaging, your labour at a fair hourly rate, and a share of overheads such as tools, rent and software.
- Wholesale price is what a retailer pays you per item, usually when buying several units.
- Retail price is what the end customer pays, whether in a shop or on your own website or marketplace listing.
The common formula
A widely used starting point for makers is:
Cost × 2 = wholesale price
Wholesale × 2 = retail price
The second step, doubling wholesale to get retail, is often called keystone pricing. It gives the retailer a margin to cover their own rent, staff, marketing and profit. The first step gives you a margin above your costs, so that wholesale orders are actually worth taking.
These multipliers are conventions, not laws. Some product types use higher or lower multipliers, and individual stockists may expect different terms. But the structure, with a healthy gap between cost and wholesale and between wholesale and retail, is what matters.
Worked example
A leather pouch uses 12 in materials and 2 in packaging, takes 1.5 hours at 20 an hour (30 in labour), and carries 4 in overhead per item. Total cost: 48.
- Wholesale: 48 × 2 = 96
- Retail: 96 × 2 = 192
If you sell that pouch yourself at 192 on a marketplace with fees of around 10% plus 0.45 per order, you keep roughly 192 − 19.65 − 48 = 124.35 above your costs. That extra margin on direct sales pays for your marketing, photography, customer service and the occasional sale. Our product pricing calculator does these sums with your own figures.
Markup vs margin
These two words are often confused, and the confusion can lead to underpricing:
- Markup is profit as a percentage of cost. Selling something that costs 50 for 100 is a 100% markup.
- Margin is profit as a percentage of the selling price. The same sale is a 50% margin.
Keystone pricing is a 100% markup but a 50% margin for the retailer. When a buyer or a stockist talks about margin, make sure you both mean the same thing. To turn a target margin into a price, divide cost by (1 − margin). For a 50% margin on a cost of 96, that is 96 ÷ 0.5 = 192.
Why your retail price must respect your wholesale price
If you sell wholesale, retailers will compare your direct prices with theirs. If you sell the same item on your website for less than the shop's retail price, you undercut your own stockists, and they are unlikely to reorder. Most makers who sell wholesale keep their own retail price at or near the suggested retail price they give to shops. Discounts and sales on your own channels deserve care for the same reason.
This is also why it helps to set your retail price using the wholesale formula even if you only sell directly today. If a shop approaches you later, you will already have room to offer a proper wholesale price without raising your retail price.
Wholesale terms to decide in advance
- Minimum order: a minimum first order and reorder value or quantity, so that each order covers your admin and packing time.
- Payment terms: whether you require payment upfront, on delivery, or within a set number of days.
- Shipping: who pays for delivery to the shop, and whether there is a free-shipping threshold.
- Lead time: how long you need to make the order, especially before busy seasons.
- Line sheet: a simple document with product photos, codes, wholesale and suggested retail prices, minimums and terms.
Consignment is different
With consignment, a shop displays your work without buying it, and pays you only when an item sells. The shop keeps an agreed percentage of the retail price. Because you carry the risk of unsold stock and wait longer to be paid, consignment splits usually favour the maker more than wholesale does, but terms vary widely. Get the agreement in writing, including the split, how often you are paid, who covers loss or damage, and how unsold items are returned.
Common mistakes
- Leaving out labour. If your time is not in the cost, both your wholesale and retail prices are too low, and growth becomes impossible because you cannot afford to pay anyone to help.
- Pricing from competitors only. Use the market to sense-check, but start from your own costs.
- Offering wholesale before your costs are stable. A wholesale price is hard to raise quickly once shops are reordering.
- Forgetting fees and returns on retail. Marketplace and payment fees come out of your retail price. Check them with our Etsy fee calculator.
- Not reviewing prices. Material costs change. Review your costs at least once or twice a year and before large wholesale commitments.
Checklist
- Calculate your full cost per item, including labour and overhead.
- Set wholesale at roughly twice cost, adjusting for your product and market.
- Set retail at roughly twice wholesale, and check it is realistic against similar products.
- Check your profit on direct sales after fees with a calculator.
- Write down your wholesale terms before the first enquiry arrives.
- Keep retail prices consistent across your own channels and your stockists.
For a deeper look at calculating cost, read our guide on how to price handmade products.
This guide is general information for sellers and is not financial, tax or legal advice. Marketplace rules and fees change, so always confirm in your own seller account. DailyToolLab is not affiliated with Etsy Inc., Shopify Inc. or eBay Inc.