Who Sets the Retail Price?

Are you wholesaling your collection? Pricing is the province of the retailer – most of the time.

price tag

When an artist uses a formula that takes into consideration their cost of materials, overhead, labor and profit margin, they set wholesale prices for each item in their line. These prices are what wholesale buyers pay to acquire the goods.

Sometimes questions come up as to whether the artist ever sets the retail price that stores will charge the consumer. The answer to that is no, but there are a few exceptions. Sometimes artists will list a Manufacturers Suggested Retail Price (MSRP) on their line sheets, but this isn’t really necessary because store buyers know the markup they must use to meet the needs of their business, and they will set their own retail prices.

Retailers have to cover their costs and make a profit themselves, and these will vary widely. Rent per square foot in a retail establishment can be very high in some areas of the country. Other overhead costs include gas and electric bills, employee salaries, marketing and advertising costs and more. These retailers must mark wholesale prices up heavily to stay in business.

Thus, retailers will increase the price in a range from a “keystone” (2x wholesale) markup to 2.3, 2.5 or even a triple key (3x) markup, depending on their costs and their market. Should artists be appalled that the $10 wholesale item they sold to a store is now selling at $30? Absolutely not. In fact, if those items are selling well at $30, that’s great – your customer will be happy, and you will be getting reorders. And when you set your wholesale price, you built in your own profit, right?

If you also retail your line, make sure that you avoid undercutting retailers. You may not be able to charge three times wholesale, but keep your own markup at least 2.3 – 2.5 to stay in line with the normal prices that your wholesale accounts are charging.

So, when are products pre-priced for retail? Usually this is for printed products, such as greeting cards, and sometimes calendars, journals, etc. This is mostly for the convenience of the retailer. No store owner wants to individually price greeting cards, especially if they are not in cellophane. Pre-priced merchandise of this type is sold at wholesale prices which are 50% of the retail price (keystone). Cards themselves are relatively small, and densely packed in fixture pockets. Thus the store can have a relatively high dollar amount of merchandise  in a very few square feet of space in the store.

If you are a wholesaler of products that are pre-priced, understand that any incentives, such as free shipping or discounts will come out of your half of the pre-printed price of the goods. Make sure you have sufficient buffer written into your wholesale prices to cover not only your own material, overhead, labor, profit and sales commission (if any) to give you wiggle room to make these offers.

 

 

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