Many retailers struggle to price for profit, especially when they’re moving from pure retail to wholesale. Sometimes, a retail price that offers a comfortable profit becomes too low for wholesale pricing due to the additional costs involved.
After all, the most common way to calculate your wholesale price is by simply dividing your retail price by half. Ideally, your costs should only take up 25% of your retail price, but keeping costs low can be tricky. Your total costs are made up of overhead costs, which are ongoing operational expenses, along with material costs that include raw materials and the finished products that make up your inventory.
If your wholesale price leaves you with narrow profit margins and you’re looking for an alternative to the 50% one-size-fits-all approach, you might want to try implementing the absorption pricing method to calculate your Recommended Retail Price (RRP) and your wholesale price.