How to calculate Retail price from wholesale and markup?
How to calculate retail price from wholesale and markup? It becomes a complicated question for the retailers and small businesses. Or for the new retailers who are converting their business from retail to wholesale. It is due to the great competition in the business field.On the other hand customers have multiple options to purchase same product from different online shoppes.
Problems of price selection
1.Retailers are facing the problem that how to select the suitable price from wholesale. 2.They are confused to set the price in accordance with their competitors or higher then that. And to low the price of their product.
- They also have a question that how the price of the item effected their markups.
Answer to these questions
There is solution of all the problems of retailers. It help you to understand the possible methods and factors to calculate the price of the product and the markup. And educate you the best use of comparison sites online.
Methods to Determine retail price
When you buy a product at the wholesale price you have to decide that which retail price is suitable. The retail price is determined with the use of three different pricing methods. That are as follows.
Pricing with the use of cost-based method
In Cost-based price setting of price on operating cost and product. This is in two forms:
Direct-cost pricing = Variable cost + % Markup
Full-cost pricing = Fixed cost + Variable cost + % Markup
Customer- value based pricing policies
With the use of this pricing method the retail price is decided to see the demand of that product. In general low price product have more demand as compare to the high price products.
Steps to find price
- Customer’s need analysis and the value perceive.
- Select the target price and match it with the customer value.
- Figure out target cost that incurred.
- Product designed to deliver. To get desired value at selected price.
- Value-added pricing
- Good-value pricing
Pricing on the bases of competition
Competition-based pricing is charging of product price as like the competitor has. This is very use full method for the retailers how have products of same nature and quality. This pricing policy works when the business is reached at the point of equilibrium. When your product is in the market for a log time and it has many other substitutes.
Calculating ideal retail price and markup
To find the ideal retail price a retail has the knowledge of some basic information.
Need the data about retail business
- Number of product to sell
- Price of your product at wholesale market
- Amount of profit you want to make
It is so important to understand the retail market. If you want to sell a product at good profit, it is necessary for you to check whether you product will sell or not. Best pricing method never works if your product is out of sale.
The cost of production of good is also the part of total retail price. So all the expenses are considered like tax, raw material cost, shipping charges, acquisition cost.
Figure out the markup. Like you thing that 1$ per item is fair markup or you want 20% profit on every item. It is batter to add markup in your product cost and you get the retail price. When you get retail price check it.
Formula to calculate retail price and markup
Retail price = Cost of product + markup
Markup = Retail price – Cost of production
Formula to calculate cost of production cost.
Production cost can be calculated with the help of following formula
Cost of production = Retail price – Markup
Factors to be considered to set retail price
As a retailer you must have the knowledge of all your products. If you select the low price it affects your profit negatively. If your price is too high you are unable to sell your product to a large number of customers. Your markup also disturbed. To select an ideal retail price the above methods are very help full and worthy for you.
It also an important factor that the quality of your product is compared with competitor. The additional benefits are also added to your product if you want to set higher price from your competitor.
If your inventory is slow moving then you have to select low price at beginning. Ans try to increase the demand of your product to sustain the required markup.
Benefits of calculating retail price
There are many benefits of calculating retail price from the wholesale prices.
It provide the retail a clear view that which pricing strategy is use full to increase markup. The retailer has in depth analyses of the wholesale market.
Retailer is directly knows the demand of the customers.