How to calculate wholesale price: Formulas + examples

Nearly 21% of small businesses in the US fail within their first year, and 48.4% close within five years, according to the US Bureau of Labor Statistics. For business owners and managers, this highlights the need for a smart, sustainable pricing strategy that protects profits while staying competitive.

Whether you’re selling apparel, electronics, or food, learning how to calculate wholesale price is a must. This guide walks you through the steps, formulas, and strategies to help you understand what wholesale price means, how to set it, and how to adjust it over time, without upsetting your customers.

Jump to:

• 4-step process for calculating wholesale price
• Wholesale price formulas + examples
• Common wholesale pricing mistakes to avoid
• Wholesale pricing strategies by industry
• How do you change your prices without losing or upsetting customers?
• Run your business with confidence

4-step process for calculating wholesale price

Setting the right wholesale price isn’t just about covering your costs—it’s about building a sustainable business. Whether you’re selling to retailers or other businesses, your wholesale pricing strategy should ensure profitability, competitiveness, and room for growth. 

Here’s a simple 4-step process to help you calculate it with confidence:

1. Figure out your costs 

Before you can set a price, you need to know exactly what it costs to make or buy your product.

This includes:

• Direct costs like materials and labor
• Indirect costs like shipping, packaging, software, or rent allocations
• Storage or admin overhead that supports production

Missing any of these can lead to underpricing and reduced profitability.

2. Decide on a profit margin

Once you’ve nailed down your costs, it’s time to choose a profit margin goal. This is the percentage of your costs you want to earn on top.

• High-volume businesses may use lower margins (e.g., 20%-30%)
• Niche or lower-volume sellers often need higher margins (e.g., 50% +)
• Your margin should account for growth, promotions, and market trends

This step is where you truly define what wholesale price means for your business's health.

3. Compare against market rates

After you calculate your ideal price, check it against what your competitors are charging:

• Research wholesale vs retail price ranges
• Benchmark against similar product quality or features
• Consider customer expectations and perceived value

Your price should be competitive but still profitable, and rooted in your actual cost structure.

4. Set your retail price

Retail pricing depends on your wholesale price, plus the markup retailers add to earn their own margin.

• Retailers often double the wholesale price
• Your retail price should reflect customer value, not just math
• Consider your brand, competitors, and customer willingness to pay

Understanding the wholesale price vs retail price connection helps create a consistent pricing experience from B2B to end buyer.

Wholesale price formulas + examples 

Now that you know the steps involved in setting a wholesale price, let’s look at some common formulas you can use. These methods help you apply a consistent, strategic approach to pricing, whether you’re just starting out or refining an existing pricing model. 

Below are three tried-and-true wholesale pricing formulas, each with a real-world example to help you apply them.

Keystone pricing formula

Keystone pricing is one of the simplest and most widely used methods for setting wholesale and retail prices. The formula involves doubling your cost to set the retail price, then cutting that in half for wholesale. 

Essentially, the wholesale price is equal to the cost of goods sold (COGS) multiplied by two and then divided by two, leaving you right back at the original markup.

Formulas:

Wholesale price = Cost of goods × 2

Retail price = Wholesale × 2

Example:

If your product costs $20 to produce, you’d set the retail price at $40 using keystone pricing. The wholesale price would then be $20, equal to your cost. 

This method is easy to apply but may not provide enough profit margin depending on your business model, especially if your costs fluctuate or you have high overhead.

Cost-plus pricing formula

Cost-plus pricing gives you more flexibility by allowing you to add a specific markup percentage to your cost. This method helps ensure that your wholesale pricing covers costs while delivering a consistent profit. It's especially useful when your product line has varying production costs.

Formula:

Wholesale price = Cost of goods + (Cost of goods × Markup percentage)

Example:

Let’s say your product costs $25 to make and you want a 60% markup. 

The formula would be:

$25 + ($25 × 0.60) = $40

Your wholesale price would be $40. Depending on your channel strategy, you could apply another markup to set your retail price from there.

This method offers more control than keystone pricing, making it a great option if you have detailed cost data and clear margin goals.

Absorption pricing formula

Absorption pricing takes things a step further by accounting for both variable and fixed costs in your wholesale price. It “absorbs” a share of your overhead, like rent, utilities, or admin salaries, into each unit price, which helps you avoid underpricing.

Formula:

Wholesale price = (Variable cost per unit + Allocated fixed cost per unit) + Profit margin

Example:

Say your variable cost per unit is $15, and you’ve calculated that your fixed costs add another $5 per unit. If you want a 40% profit margin, your formula would look like this:

($15 + $5) + 40% of $20 = $28

Your wholesale price would be $28

This method requires more effort, but it provides a highly accurate wholesale price formula that aligns with long-term profitability. It also makes it easier to explain your pricing to partners who ask, "What does wholesale price mean, and how is it calculated?"

3 common wholesale pricing mistakes to avoid 

Even with the right formulas, it’s easy to make missteps that impact profitability. Wholesale pricing isn’t a one-time task, it requires regular review and a strategy tailored to your business.

1. Not accounting for hidden costs (storage, shipping)

Many businesses focus only on reducing production costs and overlook the less obvious expenses that chip away at margins. Costs like storage, shipping, packaging, and administrative labor often go unaccounted for in wholesale pricing calculations. Over time, these “invisible” costs can add up and quietly erode profits.

2. Failing to revisit prices annually

Your costs change, so your prices should too. Yet many business owners set a price once and never touch it again. Inflation, supplier rate increases, and changes in overhead can all impact your bottom line. If you don’t adjust your prices regularly, you risk underpricing and losing margin.

3. Copying competitor prices blindly

It’s smart to check competitor pricing, but don’t assume their numbers will work for your business. Copying prices without understanding their cost structure, volume, or strategy can backfire. They may have different overhead, a different target customer, or be using loss-leader tactics.

Wholesale pricing strategies by industry

Different industries have different pricing challenges. What works in fashion may not suit food or electronics due to unique costs, customer expectations, and inventory risks. Here’s how to tailor your wholesale pricing strategy to your industry.

Fashion/Apparel (keystone pricing)

In the fashion industry, keystone pricing is the go-to model. It’s simple, fast, and widely accepted among retailers. The idea is to double your cost of goods to set a retail price, then offer that product at half the retail price for wholesale buyers. For example, if a shirt costs $20 to produce, the retail price is $40 and the wholesale price is $20.

Fashion trends move quickly, and margins tend to be high to offset seasonal markdowns and unsold inventory. While keystone pricing offers a solid starting point, fashion brands often layer in volume-based discounts or premium pricing for limited-edition items.

It’s also smart to revisit pricing with each new collection to ensure you’re not locked into outdated cost assumptions.

Food/Beverage (cost-plus + perishability)

In food and beverage, pricing has to account for perishability, tight margins, and fluctuating supply costs. That’s why many brands in this space use a cost-plus pricing strategy, adding a set markup percentage to the total cost of goods. This allows for more flexibility when ingredient prices shift or shipping costs spike.

For example:

If producing a case of sparkling water costs $8, and you add a 40% markup, your wholesale price would be $11.20. But perishability introduces extra pressure—products must move quickly, and spoilage or returns can eat into profits.

Some businesses account for this by padding their markup or offering shorter payment terms to keep cash flowing. Pricing also needs to factor in regulatory labeling or certifications, which vary by market and product.

Electronics (absorption pricing)

Electronics often involve high research and development (R&D) costs, warranty expenses, and slow-moving inventory. That’s why absorption pricing is commonly used in this industry. This method takes into account not just the variable cost per unit but also a fair share of fixed costs like engineering, support, and infrastructure.

For example:

Let’s say it costs $100 in parts and labor to build a tablet, and allocating overhead adds another $50. If you want a 30% margin on top, your wholesale price would be $195. This formula ensures that each product “absorbs” enough cost to keep your business profitable, even if sales volumes fluctuate.

Understanding wholesale price vs retail price is especially critical in electronics, where retail markups may be slim and pricing transparency online makes competition fierce. Your chosen pricing strategy will need to strike a careful balance between profitability and perceived value.

How do you change your prices without losing or upsetting customers? 

Raising wholesale prices is sometimes necessary, but it can feel risky. If the increase isn't handled well, longtime buyers may push back or threaten to walk. The key to protecting your margins without damaging trust is to make adjustments strategically.

Raise prices gradually

Instead of making a large jump all at once, consider increasing prices in smaller increments over time. This gives customers time to adjust and helps you monitor their reactions along the way.

• Tie increases to clear business reasons like rising production costs or improved quality.
• Communicate the change early so customers aren’t caught off guard.
• Offer volume discounts to help soften the transition.

Taking a phased approach gives you flexibility and minimizes the risk of losing key accounts.

Refresh your inventory

Pairing a price increase with a product update makes it easier for customers to accept. When buyers see added value, they’re less likely to resist.

• Improve packaging, quality, or features before rolling out new prices.
• Retire outdated SKUs and introduce new ones at updated price points.
• Position changes as upgrades rather than direct replacements.

This tactic helps reposition your offerings while subtly adjusting your pricing strategy.

Be honest and transparent

Clear communication goes a long way in maintaining trust during pricing changes. Customers are more likely to stay loyal if they understand the “why.”

• Explain the reasons behind the price change—rising costs, better service, etc.
• Give at least 30 days’ notice so buyers can plan ahead.
• Offer one last order at the old rate or a short-term loyalty discount.

Being upfront reinforces your credibility and strengthens long-term business relationships.

Run your business with confidence

Wholesale pricing is a strategic decision that shapes your profitability, market positioning, and customer relationships. When you know how to calculate wholesale price and apply it effectively, you can compete with confidence and scale sustainably.

Whether you’re adjusting for inflation, introducing new products, or aligning with industry standards, smart wholesale pricing ensures you’re not just selling, but thriving. Review your formulas, avoid common pitfalls, and refine your approach regularly to stay ahead. Ready to sharpen your pricing strategy? Let’s do the math with QuickBooks.