How to Calculate Wholesale Pricing: Profit Margin & Formulas (2025)

Learn how to calculate wholesale pricing and steps you can take to create successful pricing strategies for your wholesale products.

Starting a wholesale business is a great way to move lots of products with little effort, at least theoretically. But wholesale pricing is a huge obstacle you’ll need to overcome. If the price is too high, you lose potential customers. If the price is too low, you’ll have little or no profit left to reinvest in your business. 

Every retailer, at one time or another, has wrangled with the issue of product pricing, especially those who sell products wholesale. If you’ve struggled with this question lately, you’re not alone.

In this guide, learn how to calculate wholesale pricing and some steps you can take to create successful pricing strategies for your product.

What is wholesale pricing?

Wholesale pricing is what you charge retailers who buy products in large volumes. Product prices are cheaper than retail because wholesalers rely on economies of scale to make money. 

The goal of wholesale pricing is to earn a profit by selling goods at a higher price than what they cost to make. For example, if it costs you $5 in labor and materials to make one product, you may set a wholesale price of $10, which gives you a $5 per unit gross profit.

Wholesale vs. retail pricing

Wholesale and retail are two fundamentally different processes. Wholesale involves moving goods from manufacturing to distribution, and retail involves acquiring and selling goods to customers. 

Producers or distributors charge retailers wholesale prices. Then, the retailer charges consumers for that same product at a higher price—the retail price.

In retail, profit margins are typically higher, though it usually takes more work and money to make a sale. Comparatively, wholesale might have smaller profit margins, but you’re selling bulk quantities—so it’s less effort to sell 100 units wholesale than to sell 100 units direct-to-consumer. But it’s also less profitable. 

How to calculate wholesale price

1. Research your market

Before you set any product prices, determine your market segment and where you fit in. For example, are you a discount brand, a contemporary brand, or a designer brand? This also determines how your audience perceives you.

Similarly, if your target customers are more budget-conscious or looking for a high-quality, high-end product, consider these factors when conducting market research. Most customers expect to pay a premium for higher-quality products.

If a lower price point is your competitive advantage against other wholesalers, keep that in mind while researching. Be cognizant of your break-even point. Use the break-even point formula to calculate this number. 

2. Calculate your production costs

Cost of goods manufactured (COGM) is the total cost of making or purchasing a product, including materials, labor, and any additional costs necessary to get the goods into inventory and ready to sell, like shipping and handling.

A product’s COGM can be determined with the following calculation:

Total Material Cost + Total Labor Cost + Additional Costs and Overhead = Cost of Goods Manufactured

3. Set your profit margin 

Your target profit margin will help you determine how to price your product objectively. If you’re unsure how to do this, you can use Shopify’s wholesale price calculator. Play around with the numbers to see different scenarios. 

When you sell wholesale, you’re likely selling a higher quantity in each order, which allows you to sell the products at a lower price. Aim for between 15% and 50% profit margin for each product to ensure you make money after accounting for expenses.

Calculate your wholesale profit margin with Shopify’s free calculator.

4. Consider additional costs 

While you might make $2 profit per item, it might cost you more than $2 in overhead to sell that item—in which case you’ll need to adjust your wholesale pricing to make more profit. 

To factor these additional costs into your wholesale price calculation, you’ll need to know your costs of goods sold (COGS) and your overhead costs. These include rent, customer acquisition costs (CAC), utilities, and fees to run your online store. 

Calculate your cost of goods sold and the sum of any overhead costs. Once you have those two numbers, combine them to create your cost price for the wholesale price formula.

5. Use the wholesale pricing formula

Profit margin is a retailer's gross profit when an item is sold. The higher this is, the better—but wholesalers have a shorter ceiling to add profit. They make their money by selling cheaper products in bulk.

When setting your wholesale price, first multiply your cost of goods by two. This will ensure your wholesale profit margin is at least 50%.

B2B customers that buy your wholesale products will add their markup when selling them through retail. Apparel retail brands, for example, typically aim for a 30% to 50% wholesale profit margin, while direct-to-consumer retailers aim for a profit margin of 55% to 65%. 

Wholesale pricing methods and examples

Many different wholesale pricing strategies are available, but don’t fret—it’s not helpful to learn all of them if you’re new to selling wholesale. Instead, here are a few simple and easy-to-use methods you can use today. 

Keystone pricing method

The Keystone pricing method is fairly straightforward. It involves setting the retail price of a product at double the wholesale price—essentially, the retail price is 100% markup over the wholesale cost. Here’s the formula to calculate wholesale prices:

Wholesale Price = Retail Price / 2

This is arguably the most straightforward wholesale pricing approach you can take. It’s simple math and doesn’t depend on any advanced calculations.

However, Keystone pricing doesn’t account for factors like competition, demand, or perceived value. This approach may not always provide enough profit margin to cover operating expenses and generate profits. 

You also need to know the end retail price before you can set the wholesale price, which limits your buyers to how they can price your products for their customers. 

Absorption pricing method 

Absorption pricing refers to factoring in all the associated costs, including fixed costs and profit margins, when determining your price. It’s called “absorption” because all the costs are consumed in the product’s final price. 

The formula for absorption wholesale pricing is as follows:

Wholesale Price = Cost Price + Profit Margin

This wholesale strategy is easy to use and requires no training or complicated formulas. Your profits are almost guaranteed. If you can account for all expenses, you’ll likely turn a good profit.

However, pricing gaps are frequent. The formula also doesn’t consider any competitor’s pricing or value perception. You could charge too much, sending potential buyers to other providers.

Differentiated pricing method 

Differentiated pricing is a wholesale pricing method that optimizes return on investment (ROI) by calculating the demand for a product. In this case, different buyers pay different prices for the same product in different situations. It’s based on the idea that buyer acceptance determines the price on any given market condition. 

Also known as demand pricing, you can sell seasonal items at a higher price than the average market value during peak seasons. For example, the price of bathing suits can rise quickly at the beginning of the summer season, and then come back down after the demand drops. 

This also applies to areas with less competition where customers typically buy products at a higher price, such as a beach resort or an airport. 

This wholesale pricing method can deliver maximum ROI. It takes advantage of market scenarios in real time, keeps you competitive, and allows you to gain data on buyers. Plus, when there’s higher demand for a product, buyers are often willing to pay a premium, which means more profit for you.

However, there’s a fine line between maximizing profit and overcharging wholesale customers. If you’re perceived as opportunistic or people get the sense you’re price gouging them, it’ll hurt your brand’s reputation. You don’t want to be associated with this kind of greed because buyers won’t return.

Tips to set wholesale prices

Set a manufacturer's suggested retail price

A suggested retail price (SRP), also known as a manufacturer’s suggested retail price (MSRP), is the price a manufacturer or wholesaler recommends retailers set for their product. It prevents resellers from undercutting you or your other retail partners.

Calculate your recommended retail price using this formula formula:

Wholesale Price / (1 - Markup Percentage) = Retail Price

Research your market to see how other comparable brands or retailers set their prices. Then, you can work backward to see if your target retail price is feasible based on the costs you incur to produce your products.

For example, if your target retail price is $60 and you want to give your wholesalers a 55% retail margin and yourself a 50% wholesale margin, you can use this pricing formula to work backward and calculate the wholesale price:

$60 (Retail Price) x (1 - 0.55) = $27 (Wholesale Price)

Consider a dual pricing strategy 

A dual pricing strategy means you’ll create an external retail price for your products listed on your website that your direct customers see, and a separate wholesale price you share with B2B customers. It ensures that you’ll still profit regardless of where you sell. 

Here’s where the formulas come in handy. You can do the math to determine your margins and set wholesale and suggested retail prices for your products.

For example, if you design and manufacture swimsuits and sell them via wholesale and retail, you’ll need to look at the following numbers:

• COGS: $15 to make one swimsuit
• Wholesale price: $30
• SRP: $75

Then, you’ll be able to calculate your wholesale and retail margin percentages:

• Your wholesale margin: 50% Wholesale Margin = $30 Wholesale - $15 COG / $30 Wholesale
• The retailer’s margin when they use your SRP: 60% Retail Margin = $75 Retail - $30 Wholesale / $75 Retail
• Your retail margin when you sell DTC: 80% Retail Margin = $75 Retail - $15 COG / $75 Retail

With the above wholesale and retail pricing strategy, you’re making a gross profit margin of 50% on your wholesale orders and 80% on DTC orders.

Pro tip: Shopify merchants can create a B2B storefront from the same commerce platform that powers their ecommerce store and retail stores. Unify your inventory, customer, and order data to get one single source of truth—no matter where you’re selling (and who to).

Think about sales volumes

When setting your wholesale prices, consider how much your retailer customers order. Lower wholesale prices for bulk orders can incentivize large customers. On the other hand, if you anticipate smaller order volumes, you may need to adjust your wholesale prices to maintain profitability.

Strategically align your pricing with expected sales volumes to balance competitive pricing and sustainable profit margins. 

Minimum order quantities come into use if you need to sell a specific number of products to turn a profit. That might mean a minimum order quantity of 50 units—wholesalers must exceed this threshold to place an order.

Review wholesale prices regularly 

New competitors, cost-effective suppliers, and fluctuations in customer demand can all impact your wholesale pricing strategy. 

That’s why it’s important to regularly audit and review your wholesale prices to ensure profitability and maintain a competitive edge. Remember to consider the cost of everything that goes into your products, as production costs can also change on a regular basis. 

Manage wholesale pricing with Shopify 

Now that you better understand the formulas used to calculate product pricing, it’s time to build your own wholesale pricing strategy.

Use the formulas above to create a costing chart you can plug numbers into each time you need to define pricing for a new product. You’ll be able to calculate financial metrics like the cost of goods, wholesale price, wholesale margin, retail price, and retail margin.

Shopify’s unified commerce platform makes selling wholesale and DTC from the same operating system easier than ever. Create a password-protected storefront to show your wholesale price lists for approved B2B buyers through their account login, using the same inventory data that powers your DTC storefront.

“On Shopify Plus, our team has the liberty and the space to build relationships with customers, instead of just transacting with them,” says Nicolas Lukac, director of emerging channels at Brooklinen. “We spend more time understanding our customers and less on manual inputs. This allows us to provide exceptional experiences for our DTC, B2B customers and retail customers alike.”

How to calculate wholesale price FAQ

What is the formula for wholesale price?

Here’s the easiest formula to calculate wholesale prices: Wholesale price = Cost of goods + Desired wholesale margin.

What is the wholesale price method?

The wholesale price method takes your break-even point into account. Add up your total costs and business expenses, and multiply this figure by your desired profit margin to calculate wholesale prices.

What is a good wholesale profit margin?

A good wholesale profit margin is anywhere from 15% to 50%. Retailers tend to add their markup (between 35% and 65%) when reselling wholesale items to their customers.

What is the best pricing strategy for wholesalers?

The Keystone method is the simplest pricing strategy for wholesalers. It sets the wholesale price as 50% of the retail price.

What is the difference between wholesale and retail price?

Retailers set retail pricing and is the final selling price for customers. Wholesale prices are typically much lower than retail prices because retailers are offered a discount in exchange for agreeing to purchase a large amount of product.