How to Calculate Retail Pricing

by Deb McLeod - Updated September 26, 2017

When you run a retail operation, it’s important to know how much your products should be. Price too low and your profit is negatively affected. Price too high and you won’t sell enough to make a profit. Let’s look at some ideas for how to calculate retail pricing for your business.

Understand your retail market. If you are looking to sell a product for a good profit, you need to make sure that your product will sell. The best pricing structure in the world won’t work or be relevant if you have a product that doesn’t sell.

Know how much you paid for your product. When you figure your cost for the product, consider any tax, shipping or other costs associated with acquiring it. Did you have to get your product yourself? How about the costs of gas associated with that?

Figure your markup. Do you think that $1 per item is a fair profit, or do you want to make a flat 20 percent on everything you sell?

Add the markup to your product cost to get your retail price. Once you get your retail price, examine it. Is it too low? If you get your product for a particularly good price, you might be able to mark it up higher and get a better profit. Have to pay more for your product? Be careful at pricing your product too high. You might not sell it at all. In order to ensure sales, you might need to lower your price.

Remember these formulas: To calculate retail pricing: Cost of product + markup = retail price To figure markup: Retail price – cost of product = markup To figure product cost: Retail price – markup = cost of product

Tips

  • Be willing to change your retail price when necessary.

About the Author

Deb McLeod is a freelance writer specializing in Web content. She writes online courses, press releases, articles for SEO purposes, basic content articles, feature articles, e-Books and anything else she's asked to write. A former newspaper reporter, she also knows how to get things done on time. She has a Bachelor of Arts degree in English.

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