Wholesale Pricing and Margins Explained
The short answer
Wholesale pricing is the discounted price you charge a store, and it usually sits at about 50% of your retail price, so the store can double it (the keystone markup) and keep a 50% margin. Your wholesale price still has to cover your cost to make and ship the product and leave you a profit. Work from three numbers: your cost (COGS), your wholesale price (commonly twice your cost or more), and your retail price (about twice wholesale). If a distributor is involved, build in a second margin, because two businesses now take a cut before the shopper.
What is the difference between cost, wholesale, and retail price?
Three prices drive every wholesale decision. Your cost (COGS) is what it takes to make and package one unit. Your wholesale price is what you charge a store. Your retail price, also called MSRP, is what the shopper pays. The standard chain is simple: retail is about twice wholesale, and wholesale is at least twice your cost.
| Price | What it is | Example |
|---|---|---|
| Cost (COGS) | What it costs you to make and package a unit | $5.00 |
| Wholesale price | What you charge the store | $10.00 |
| Retail price (MSRP) | What the shopper pays | $20.00 |
What is keystone markup, and what margin do retailers expect?
Keystone markup means doubling the wholesale price to set the retail price, which gives the store a 50% margin. Most independent retailers expect at least keystone, and some categories expect more, in the range of a 2.2 to 2.5 times markup, to cover higher overhead. If your product cannot support keystone, buyers will pass, because the math does not work for their shelves.
One thing trips up almost every founder: margin and markup are not the same number. Margin is a percentage of the selling price, and markup is the increase over cost.
| Term | Formula | Keystone example |
|---|---|---|
| Margin | (Price minus cost) divided by price | 50% margin |
| Markup | (Price minus cost) divided by cost | 100% markup |
How do you set your wholesale price?
Start from your true cost and your target margin, then sanity-check against the retail price the market will bear. Pricing from cost up and from retail down at the same time keeps you both profitable and competitive.
- Calculate true COGS. Include packaging, inserts, and per-unit production, not just the raw product.
- Set your wholesale price. Commonly twice your cost or more, so you keep a healthy margin after shipping and fees.
- Set retail at keystone. Double the wholesale price to give the store its expected margin.
- Check the market. Make sure that retail price is competitive against comparable products.
- Confirm you still profit. Subtract shipping, marketplace commission, and overhead, and make sure the wholesale price still pays you.
How do marketplace fees and distributors change the math?
Every channel takes a different cut, so you price for the channel, not in the abstract. A marketplace commission reduces what you net on the orders it brings you. A distributor takes a whole second margin, so your price to it has to be lower than your standard wholesale price. The table below shows roughly what you receive on a $20 retail product across channels.
| Channel | Who takes a cut | Roughly what you receive |
|---|---|---|
| Direct to consumer | No one (you sell at retail) | About $20 |
| Direct wholesale to a store | The retailer | About $10 |
| Wholesale marketplace | The retailer, plus a platform commission | $10 minus the commission |
| Through a distributor | The distributor and the retailer | About $7 to $8 |
Treat those figures as illustration, not a fixed rule. The key point is that you cannot add a channel later without planning for its margin now, which is why brands that want wholesale distribution price for two margins from day one.
What is MAP, and why does pricing consistency matter?
MAP, the minimum advertised price, is the lowest price you allow anyone to advertise your product. Consistent pricing across your own website and your stockists protects retailers' margins and your brand. If your direct to consumer store undercuts the stores that carry you, those stores stop reordering, and reorders are where wholesale becomes a real channel. Set a clear MSRP, keep your own site at that price, and consider a written MAP policy as you add more stockists.
How do you protect your margin as you grow?
Margins erode quietly through discounting and rising costs. Protect them deliberately. Revisit your COGS as volume grows and your unit costs fall, avoid permanent discounts, use minimum order quantities and volume breaks with intent, and raise prices when input costs rise rather than absorbing them. Getting pricing right underpins everything else, including getting into stores. Finding the right channels and running the outreach on top of solid pricing is what Ginger does for brands.
Frequently asked questions
- What is a good wholesale margin?
- Aim to sell wholesale at about 50% off your retail price and still make a profit. Many brands target a wholesale price of at least twice their cost to make the product. The right number depends on your category, your costs, and the channel.
- What is the difference between margin and markup?
- Margin is profit as a percentage of the selling price, while markup is the increase over your cost. They are easy to confuse: a 50% retail margin is the same as a 100% markup, which is the keystone convention retailers use.
- How do I price for a distributor?
- Build in a second margin. A distributor buys below your standard wholesale price and resells to stores, so two businesses take a cut before the shopper. Plan for that from the start and make sure your cost still leaves a profit at the lower price.
- Should my website price match my retailers' price?
- Yes. Keep your direct to consumer price at the same suggested retail price your stockists charge. Undercutting your own retailers erodes their margin and the relationships that drive reorders.
- What is MAP pricing?
- MAP stands for minimum advertised price, the lowest price you allow a retailer to advertise your product. A MAP policy keeps pricing consistent across stores and protects everyone's margin, including yours.
Want this done for you?
Ginger finds the retailers, runs the outreach, and grows your reorders on Faire and beyond. You make the product, we grow the orders.
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