Wholesale Price: Definition, Pricing Methods, and Calculation
09 Nov 2020
When it comes to Product Pricing every wholesale business should put a foot forward to enlarge its audience of the retailers, offer them affordable and profitable prices. The prices should be beneficial for both sides so you can generate consistent, recurring revenue. Choosing the right wholesale pricing strategies without thorough research of the marketplace will not always come out to be marketplace gold.
The world of wholesale pricing strategies is vast and diverse, however, being inconsiderate towards the right wholesale price will be a draining way to manage your inventory.
Here are the main advantages of choosing the Right Wholesale price for your product.
- Reach the desired revenue.
- Marketplace gold chances for product availability.
- Consistent enterprise for your products excluding taxes and other costs.
The Best Wholesale Pricing Formula for Your Business: Does It Exist?
Every business should aim at having a perspective of future growth along with being able to handle the roller coaster of different challenges and opportunities, engage new customers, and have it all at one plate without practising loss of income.
The world of wholesale pricing strategies is vast and diverse, however, every business should choose the one which fits their requirements the best, however, there’s no magic formula working for all the businesses.
It should all sound tricky but determining the real cost of your products is not the hardest thing to do.
The most confusing aspect of the calculation of the Wholesale Price probably is the product margin and gross margin calculation.
Wholesale Price Definition: It is the price that the Wholesaler charges from the Retailer or a relatively small business owner in exchange for a group of products or services. The Wholesale price may seem way too much of a significant amount of money at first glance, but in reality, the pricing per unit of the item makes it logical to understand that it’s just a fraction of the cost of the retail price.
Wholesale price is made up of the following four key elements:
- Material cost
- Overhead costs (including overheads associated with selling the product/service)
This brings up your pricing formula to something like this:
Material + Overhead + Labor + Profit = Wholesale Price
Any business is aimed at making a profit. This is why special attention to the quality of materials as well as taking care of your employees’ well-being matters. The inevitable result of such an attitude will bring you your desired proper income.
Key Element No. 1 Material: Determine the cost of the raw material for the production of each unit of product, including the consideration of tools. This assumes special attention to the business field where you are in. Factors like the establishment of manufacturer minimums, price breaks, and lead generation matter. The great advice is to go in-depth and make research on the available material options relevant to your business requirements.
Key Element No. 2 Labor: The cost of the labour oftentimes is confusing if you are inconsiderate of it. This means that the cost of the labour is not only the simple calculation of remuneration per your employee. Any product development process has its dependencies on the human factor as well. This assumes the employer’s in-depth knowledge, experience, commitment, and at last but not at least the productivity scale.
Key Element No. 3 Overheads: This is the cost that could be put under the indirect costs section in general as referred to as its understanding in business. These are ongoing expenses that are in consideration while creating products or services.
An example of an Overhead Cost may serve renting, insurance office supplies, travel expenses, accounting, legal expenses, and many other similar types of expenses.
Key Element No 4 Profit: The Profit issue may sound exclusively tricky for many wholesalers, however, there are 2 distinctive approaches that could help businesses to figure it out. The first approach is about doubling the breakeven price at twice or twice a point five scales to make a final wholesale price calculation.
Overall, we can conclude that despite the fact that there is no magic calculation formula for Wholesale Pricing, nevertheless, you can have a general idea of approximate calculation data for your business’s future growth if you are considerate of the key factors which matter in the wholesale calculation.
eSwap has great news for its users: B2B eCommerce Platform for Wholesalers.
Invite your wholesale customers to your own B2B eCommerce Platform and set custom prices.