BACE Blog

Price Points – Wholesale, Retail & Distributor’s Pricing

July 22, 2008 by Mel Lim | tools | 2 Comments

A fan that is also interested in establishing her own line recently emailed us asking us about price points. This is definitely a tough question but we will try our best to answer.

Wholesale pricing is generally 50% of the MSRP (Manufacturer’s Suggested Retail Pricing). Sometimes wholesale pricing can be more than 50% and up to 70% of the MSRP depending on your profit margin.

For example: If it costs you $2.00 to make a cup, $4.00 would be your minimum wholesale pricing (at least), $8.00 would be your MSRP. (The numbers are flexible depending on your production quantities. We all know that the more you produce the less you pay per unit.)

Distributors usually ask for a 30%-50% discount off your wholesale pricing before they will even consider distribution. This makes sense when they order in LARGE bulk quantities and have to pay for import taxes, duties and fees. But it does not make sense when they only order 100 pieces or less of each design because your regular retailers in the U.S. would buy that same amount sometimes.

Our fan also asked how did we establish our price points. This is a question, we cannot answer for you. It is different for everyone as so many factors are involved. The #1 question you should be asking yourself in setting any type of pricing is; are you making a profit? That’s the bottom line! You must also take into consideration costs of goods (raw materials, production costs), labor, time and value of our designs and BRAND recognition.

People have also suggested, looking at what other designers are pricing their products and look at what other big chain stores are pricing the same items. This is tricky. It’s hard to compare apples to apples. You have to study if their products are made locally or outsourced, if a portion of their sales go to charity, if the products are made under Fair Labor, what type of materials they are using, are they imported or local materials, the size of their production and many other factors.

Your brand will also drive your price points. Wal-Mart products are made in CHINA and they are truly affordable but if compared to other luxury brands that are also made in China, the price difference is HUGE.

Study your business plan. See what type of production you are planning to do. Research the market. Analyze your target audience. These are all part of writing a successful business plan. Visit your local SCORE. They offer free counseling sessions for small start-ups. The counselors there are truly amazing.

NOTE: Don’t forget to also factor in sales reps commissions which range from 10% – 20%.