Retail Dogma

Retail Price: Definition, Example & Considerations

Retail price is the price of the product, when sold in single or few quantities to the end consumer. It is sometimes referred to as sticker price or MSRP (Manufacturer’s Suggested Retail Price)

Retail Price Vs. Wholesale Price

The wholesale price is the price of the product when bought from the manufacturer or wholesaler in large quantities, by a business that will later on sell it in single or smaller quantities to the general public at retail prices. The wholesale price is lower than the retail price, and the difference is the retailer’s markup.

In order to qualify for buying at wholesale prices, a business usually needs to meet minimum order quantities (MOQs) to get the bulk discount. In many cases, the buyer also needs to prove his status as a business, to qualify for buying at wholesale prices. This could be done by submitting business registration documents or resale certificates.

How Retail Price is Set

Retail Businesses Make Money by buying at wholesale price and selling at retail price
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Retail businesses buy products in bulk at wholesale prices and sell them in small quantities to the public at retail prices. While setting the sticker price, many factors are taken into consideration.

Considerations

  1. The markup set by the retailer should be reasonable, in order to generate enough gross margin, which then pays for the business operation costs.
  2. The original price should be set while keeping in mind that future markdowns might be needed
  3. The price should be competitive enough, so that customers don’t go for other businesses to buy the same product at lower price.
  4. The price should reflect the brand value and positioning
  5. If the manufacturer is enforcing a strict MSRP, then the retailer should respect it

We explain those considerations in details in our article on pricing strategies considerations

Tip

Become a member and learn how to price an entire product portfolio and maximize the profits you get out of each category, while staying competitive with your pricing. Access the complete guide, template and tools.

Retail Price Example

Business A bought 100 pieces of T-shirts at a cost price of $ 4.5. The business owner decided to put a 100% markup on this product and set the retail price at $ 9. This price will give the business a 50% gross margin on this product.

Pricing Formulas

Markup Formula

A D V E R T I S E M E N T

Markup (%) = (Retail Price – Cost Price) ÷ Cost Price x 100

Gross Margin Formula

Gross Margin (%) = (Retail Price – Cost Price) ÷ Retail Price x 100

See all retail math formulas and download a free cheat sheet

Useful Pricing Tools

Use our free online pricing calculators

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