Our convenient wholesale pricing calculator is designed to help you choose the right wholesale price for your products. After all, businesses buying wholesale products expect to be able to access their goods at a significant discount.
The better your offer is, the more likely you are to encourage bulk purchases, and create loyal clients. However, when selecting the right wholesale price, you still need to ensure you’re making a profit. With our wholesale pricing calculator, you can ensure you’re setting your business up for success.
Enter the information required into the fields below to start calculating the perfect wholesale prices, or read on for more tips and insights on pricing your wholesale products.
Wholesale Pricing Calculator
This wholesale pricing calculator rapidly determines the exact price you should choose for your wholesale products, with no complex number crunching required on your behalf. All you need to do is enter the typical manufacture price for your chosen item, the expenses, and the number of units produced.
This easy-to-use solution will allow you to experiment with your pricing structure as much as you like. You can enter different values for the cost of goods sold, the overhead costs, and the markup, to see which strategy will give you the best profit margin.
What is Wholesale? An Introduction
When people use the term “wholesale”, they’re often referring to one of two things. When a business purchases goods in large quantities directly from manufacturers in order to leverage a discount, this is known as “wholesaling”. A company that purchases wholesale products will generally buy large numbers of a specific item, and keep their products in warehouses to resell to customers.
Alternatively, the term “wholesale” can also apply to the manufacturer responsible for selling bulk goods. A manufacturer or business that produces their own products and sells them directly to retailers, often for a discounted price, is also known as a “wholesale vendor”.
Wholesaling in both of its forms is common in both the retail and ecommerce world. It allows organizations to access products with low overhead costs, to increase potential profits.
How Do Wholesale Businesses Work?
Whether you’re a business retailer or product manufacturer, selling wholesale goods can be an excellent strategy for growing your organization. The sales model is extremely popular, particularly now that wholesale websites like Shopify, Amazon, and Handshake are streamlining the distribution process. In fact, the demand for wholesaling has grown almost consistently in the last few years.
Wholesale selling is what happens when a product manufacturer sells batches of items in bulk straight to other businesses, who can then resell these products onto customers, for a “RRP” or Recommended Retail Price. The wholesale products sold are generally popular, in-demand, and should often sell relatively quickly and easily to consumers.
In most instances, the wholesale process involves four parties: the wholesaler, the distributor, the retailer, and the customer. In some cases, the distributors (third parties which assist companies in purchasing wholesale goods), is removed from the equation, as certain businesses will connect directly with wholesale sellers instead.
The steps involved in setting up a wholesale business can vary. However, in most cases, it will start with market research. Manufacturers examine the market to see which products are selling well for business owners. These companies then create products, for the lowest cost possible, and choose a competitor price for their items, so they can sell them in bulk.
Some wholesalers will also sell raw materials to other companies so these organizations can produce products for themselves, at a lower price than would be required to purchase from distributors. Wholesalers then market their goods to the relevant businesses, using platforms like Amazon and Shopify, or by working with distributors.
Retailers then purchase these products, and use a specific pricing method, and a margin calculator to ensure they make a profit when selling items to their end-users or customers.
Calculating Wholesale Price
Calculating the right product pricing method for a wholesale product can be a complex process. There are numerous factors to consider, including the production costs for the item, the materials cost, labor cost, and the end sale price for the retailer.
Just like creating wholesale products, pricing these items often starts with researching a specific market. Wholesalers need to determine their market segment, and how they’re going to position themselves in the industry. Some companies aim to be seen as “discount brands”, which can help other small business owners to get started in their industry. Others position themselves as luxury retailers, selling high-quality products.
If you opt to be a discount retailer, it’s important to ensure you’re aware of how you need to price your items to “break even” on your production costs. You’ll need to calculate the cost of goods manufactured (COGM), looking at the total price you pay for labor, materials, and any other fees necessary to get your goods ready to sell.
From there, you’ll set a wholesale price. Most companies will multiply their cost of goods by two, to ensure their profit margin is at least 50%. The typical profit margin you aim to create for your company will depend on your industry. A typical wholesale margin for companies in the apparel sector is usually between 30 and 50%, while a direct-to-consumer retailer will aim for a retail margin of around 50 to 65%.
How Do Wholesalers Make a Profit?
Wholesale companies use different methods to ensure a wholesale profit. A common pricing formula for a wholesale brand is known as “absorption pricing”. This involves factoring all the costs associated with creating a product into the end cost of the new product. In this strategy, the formula for pricing a product looks like this:
Cost price + profit margin = wholesale price.
In other instances, wholesale companies might use something called differentiated pricing. In this template, the wholesale company uses their pricing strategy to optimize return on investment, by calculating demand for their product or solution.
Also known as demand pricing, this involves selling products for a higher price during times when demand for the solution increases. For instance, during the holiday period, retailers may sell Christmas-focused items for a higher cost. However, when the demand for the product reduces, the cost of the product will also drop again.
To help retailers make the most of their products, some wholesalers will also offer a suggested retail price for their items, based on in-depth research into the market. This ensures retailers can choose the right selling price for their items to make a profit, while also ensuring the wholesaler can continue to make a profit on the basic cost of producing the items.
Using Our Wholesale Pricing Calculator
Our wholesale pricing calculator will ask you for simple details about the total cost of creating your items, including everything from materials to shipping costs. Once you’ve entered these details, you can include the markup for your item when selling to retailers, and the recommended retail price.
Once you generate a cost for your items, you can multiply this by the number of units your retailer wants to buy, to determine the overall price for the purchase. Remember, you can experiment with different variable cost strategies to see how they’ll influence your gross profit and margins.
We’d recommend experimenting with a few different pricing strategies to determine how you can make the most money from your wholesale products.
