Wholesale vs retail pricing for makers

Wholesale price = your cost per unit ÷ (1 − your margin). Retail price = wholesale price ÷ (1 − the shop's margin).

Retail is the price the end customer pays. Wholesale is the lower price you charge a shop that buys several units to resell. The shop needs its own margin between the two, so your wholesale price has to work for you and still leave room for the shop.

Start from cost, not from the shelf price

Your cost per unit is materials, your labor, a share of overhead and packaging for one unit. If you have not worked it out yet, the guide to pricing handmade items shows how. Your wholesale price must cover that cost and leave the margin you want. If it does not, every wholesale order loses money, however large it is.

What keystone means

"Keystone" means the shop doubles your wholesale price to set its retail price, which is a 50% shop margin. Not every shop works that way, so ask each one what margin it needs and use their number. If a shop needs 55%, retail = wholesale ÷ 0.45, which is more than double.

Worked example (fictional numbers)

A soap maker's bar costs $1.40 in ingredients, $1.20 in labor, $0.30 in overhead and $0.30 in packaging: $3.20 per bar. These are example numbers, not suggested prices.

At a 40% wholesale margin: $3.20 ÷ (1 − 0.40) = $3.20 ÷ 0.60 = $5.33 wholesale. The maker keeps $2.13 a bar.
A shop on a 50% margin: $5.33 ÷ 0.50 = $10.66 retail. The shop keeps $5.33 a bar.
An order of 36 bars is worth 36 × $5.33 = $191.88 to the maker, with 36 × $2.13 = $76.68 profit.

Now compare a retail sale of the same bar on Etsy at $10.66, using the US rates in our Etsy fee calculator and leaving shipping aside. Fees are $1.46, so the maker keeps $10.66 − $3.20 − $1.46 = $6.00 profit, a 56.3% margin. Per bar, the retail sale pays more. The wholesale order pays less per bar but sells 36 at once, with one invoice and one shipment instead of 36 separate orders. Which mix suits you depends on your own time and numbers.

Keep retail prices consistent

If you sell the same item online for less than the shop's shelf price, you compete with your own stockist. A simple rule: keep your own retail price at or above the retail price a shop will charge, which is $10.66 or more in the example. If that feels too high for your buyers, look again at your cost and your margins rather than cutting only your online price.

Before you send a wholesale price list

Check you can make the quantity. 36 bars at once may need more time and materials than you have on hand.
Set a minimum order that is worth the time it takes to pack and invoice.
Agree who pays shipping and when payment is due, in writing.
Re-check your costs before each new price list, so an old wholesale price does not quietly eat your margin.

Try your own numbers in the wholesale price calculator: it shows your wholesale price, the shop's shelf price and what an order is worth. Making jewelry? The jewelry pricing calculator compares the 2x/2x formula with margin pricing.