Yesterday, I left you with this:
Today, let’s discuss this:
wholesale price x 2 = retail price
Calculating the retail price of an item is really pretty straightforward. You take the wholesale price times two. Why? Well, remember all that talk yesterday about me being an employee of SnugasaBugBaby AND the owner of SnugasaBugBaby?….well I am also the retailer: I sell the items to you. This formula reflects a traditional business model in which a wholeseller sells the product to a retailer who sells the product to you. (Actually there are typically a lot more people involved, but this is the simplified version). The retailer marks the price up in order to cover their expenses and make their own profit. The retail profit margin also allows retailers to offer special promotions and sales.
Now, the internet had changed a great many things…one of them being that I, as a wholeseller, can sell directly to the consumer without going through a retailer. (Or we might consider etsy to be my retailer…but that would mess up this whole formula we are working with here in which etsy is included in the next part where we add in fees…so let’s just stick with me being the retailer…plus, etsy will get their money no matter the language we use). There are many things that I do as a retailer that I need to consider when establishing my prices. For example, the time I spend taking pictures and then editing, reformating, and posting them. Figuring out shipping rates and policies and doing what I can to market my products are things I do in order to manage my shop (as a retailer), not make a product (as a wholesaler). Really this entire website and all the time I’ve put into developing was originally intended as marketing. It has become more than that, however, and I don’t expect financial compensation for the time I spend showing you pictures of my sweet boy making mud pie or how I made a wreath out of beans.
Another reason I should include a retail mark-up is so that I have the opportunity to sell retail if the opportunity arose. If my etsy prices are wholesale prices and I can’t offer a retailer a better deal to buy from me to sell in their store, then they won’t. I also intend to have a Grand Opening Give Away in the near future and to periodically offer sales and discounts. Such promotional offers are things I do as a retailer, and the cost of the items should be covered financially as a part of my retail profit.
Still, I cannot justify doubling the price of my products after I have already added a profit margin. I simply cannot do so and stay competitive with my market. It is also the case that many of the formulas I found which included doubling for retail failed to include a profit margin in the wholesale price, and those that included a profit margin were only disussing the establishment of wholesale prices. I have decided to roll together my retail mark-up and my profit margin. Therefore my new formula looks pretty much like what I left you with yesterday…except there is an added degree of complexity to the question mark. In addition to covering future business expenses, and finance growth, the number which fills in that blank must also cover retail marketing and promotions. Here it is again:
There is still one last piece of the pricing puzzle to fill in: fees.
But this post is already long enough….let’s cover that for tomorrow.
Follow the Whole Pricing Process:
Adding Retail Mark-Up ? (You are Here)