subject: How to Price your Wholesale Product [print this page] How to Price your Wholesale Product How to Price your Wholesale Product
Pricing your product is a matter of skill. The correct pricing of your product determines the success of your business to a large extent. For wholesale pricing, you need to bring the fixed costs, variable costs, and market value of your product into the limelight.
The correct price of your product is the one that appears affordable to your customers and at the same time, covers the production cost incurred, to give you a profit margin.
Steps to take in Fixing the Price
Estimate the total cost of production. This includes the cost of procuring raw materials, transportation, manufacturing, customs or surcharges, office equipment, warehousing charges, licenses, insurances, and others. After calculating the total costs, divide it by the total number of products that you have produced. This gives the price of each product. Remember, labor costs are not included in production costs.Now is the time to estimate labor costs. It is the sum of the hourly labor pay, state and national labor taxes, and additional benefits to labor like, retirement packages, incentives, and insurance. You must take into account every cost that is incurred in maintaining labor.Add the production cost and the labor cost. This gives your break- even price for each item. This resultant figure is the lowest price you can fix for your product and still cover your expenses. However, if you fix this lowest figure as the price of your product, you may face a hard time making profit in your business.You need to fix an appropriate profit margin. You will develop this skill through trial and error. Many wholesalers double their break- even price. This provides 100 percent profit margin. It means that you cover every dollar you invested in production of the items and also make profit of the same amount. However, this trick may not work, if your competitors charge a lesser price than you. Analyze every detail, including the market scenario, before fixing a price.
An alternative way to determine the price of your product is to find out the average retail price of your item in the market. Divide this price with your break-even price to get the overall multiplier. Wholesalers usually charge half of the average retail price. Again, you need to take a look at what your competitors are charging the customers in your niche.
Before you finalize the wholesale price of your product, remember that retailers want the best quality at the lowest price.
