How to Calculate Wholesale Markup Prices to Retail Prices

Many retail companies calculate wholesale to retail markup prices, which help these retailers set selling prices that are suitable for consumers.

If you're helping your business determine the best selling price to set, you can calculate wholesale to retail markups to get an idea of what to charge customers for certain products.

Similarly, calculating wholesale to retail markup using the formula retail price = wholesale price (1 – markup %) can help companies determine the best retail price for their products.

In this article, we explore how to calculate wholesale to retail prices, what formula to use to calculate wholesale to retail markup, and tips on calculating retail markup so you can help your company meet revenue goals and meet customer needs.

Calculate Wholesale Markup Prices to Retail Prices

What is the wholesale to retail markup price?

Wholesale to retail or retail markup refers to the process a business uses to set the selling price of products available to consumers. You can calculate the wholesale to retail markup using the wholesale price of a product and evaluate the best selling price for a consumer to buy that product.

The selling price you calculate can vary depending on several factors, including competitive pricing, customer needs, and the value the customer places on the product. Retail businesses that purchase goods wholesale to sell to consumers typically use a wholesale-to-retail markup to set prices that achieve their revenue and profit goals.

The formula for calculating wholesale to retail markup prices

The formula for calculating the wholesale to retail markup percentage of a product is retail price = wholesale price (1 – markup %), where the wholesale price is the cost of the product from the manufacturer or supplier and the markup percentage is the ideal percentage of the wholesale price you add to costs to find the price ideal retail.

You can use this formula to determine a suitable retail price as long as you know the markup percentage to apply to the product.

How to calculate wholesale to retail markup prices

Use the formula retail price = wholesale price (1 – %) markup and the following steps to calculate wholesale to retail markup:

1. Determine the wholesale price of the product

The wholesale price of a product is what a retail company pays for the product sold to consumers. Typically, wholesale prices are displayed on products purchased by businesses as wholesale prices. As an example, assume that a company pays $250,000 to wholesale a small keychain to sell at retail.

The company must calculate the wholesale cost per unit to apply the formula. If a company pays 250,000 for a bulk purchase of 10,000 keychains, the wholesale price for each keychain is 25. Using the formula, plug this value in for the wholesale price:

Retail price = wholesale price ÷ (1 – markup %) = retail price = (25) ÷ (1 – markup %)

2. Identify the ideal markup percentage

Many wholesalers and manufacturers set a suggested retail price or ceiling retail price that retailers use to determine the markup percentage to apply.

However, some businesses have a predetermined markup percentage that results in a suitable retail price that achieves revenue goals and meets customer needs. Using the keychain retailer example, assume the company's ideal markup percentage is 65%. The company uses this value in the formula:

Retail price = wholesale price ÷ (1 – markup %) = (250)÷(1 – 65%) = (250) ÷(1 – 0.65)

3. Subtract the markup percentage from one

Once you have your desired wholesale price and markup percentage, subtract the markup percentage from one. With the company example, this step might look something like this:

Retail price = (25) ÷ (1 – 0.65) =

Retail price = (25) ÷ (0.35)

4. Share the difference with the wholesale price

After finding the difference between one and the markup percentage, divide the result by the product's wholesale price. For example, a company that sells keychains to customers splits its wholesale price by 25 the difference between one and its markup percentage is 65%. Using the formula, the company calculates:

Retail price = (25)÷(0.35) = 7.1

5. Set a retail price based on your results

If you have a manufacturer's, you can usually set a retail price using this information. However, using a formula can help you determine a retail price point that meets your revenue goals and customer demand if your business sells products without a manufacturer's.

In the case of the example of a company selling keychains, it was found that the retail price of $7.1 per keychain supported its revenue goal while remaining within the price requirements of the customer.

Tips for calculating wholesale to retail markup

When determining the most appropriate wholesale to retail markup for a company's products, consider these tips to guide your evaluation:

     Research pricing data: Consider competitive retailers and how these businesses price products and determine what customers are likely to pay for similar products in your market. This information can give you insight into where to set your retail price.
     Consider sales volume: Understanding your sales volume can give you an idea of which products could benefit from a retail markup and how to make each markup work together to maximize sales and profits.
     Look at product diversity: Consider the product diversity in your company's inventory. For example, more unique or rarer items can generally mean a higher markup if the wholesale costs are higher. Likewise, some products benefit from reduced prices, especially if they are common products that are widely available.
     Analyze business costs: Retail markup of inventory items often includes the costs a business incurs to provide products to consumers. Consider how much it costs your company to purchase and supply goods to determine an appropriate markup percentage.
     Make necessary modifications: Wholesale to retail markups benefit from continuous evaluation. Check periodically to determine whether current retail prices meet company goals and make modifications if necessary.

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