Quick answer: Work backward from the shelf. Set an MSRP that fits the market, subtract the retailer's margin to find the price they'll pay, subtract the distributor's margin (if one is involved) to find your wholesale price, then subtract landed cost, freight and allowances to see your profit. If there's not enough margin left, change the product, the cost, the channel or the price.
Key takeaways
- Price from the shelf backward.
- Margins stack: retailer, distributor, you.
- Freight and allowances eat margin quietly.
- Same MSRP everywhere protects your brand.
The margin stack
| Level | Price | Their margin |
|---|---|---|
| Consumer pays (MSRP) | $24.00 | — |
| Retailer pays | $12.00 | Retailer: 50% |
| Distributor pays | $8.40 | Distributor: 30% |
| Your landed cost | $4.20 | You: 50% on $8.40 |
Illustrative branded tumbler. Margins vary by partner and category.
Formulas: - Retailer cost = MSRP × (1 − retailer margin) - Distributor cost = retailer cost × (1 − distributor margin) - Your margin = (your price − landed cost) ÷ your price
Step 1: Set the MSRP
- Compare similar products on shelf and online.
- Decide your position: value, mainstream or premium.
- Round to a price point shoppers recognize ($19.99 or $24 depending on the retailer's style).
Step 2: Know your landed cost
Include product, decoration, packaging, inbound freight and duties, divided per unit. SPS Commerce notes that packaging materials often account for 2–15% of a product's total cost, and retail-ready packaging requirements can push you toward the higher end.
Step 3: Account for hidden costs
- Outbound freight (who pays: FOB origin vs. delivered)
- Allowances: promotional funds, markdowns, damages
- Slotting fees for some retailers
- Chargebacks for compliance errors; see our chargebacks guide
- Payment terms (net 30, 60, 90) and early-pay discounts
- Returns policies
These can easily take 5–15% of revenue. Build them into your model.
Step 4: Direct vs. distributor
| Direct to retailer | Through a distributor | |
|---|---|---|
| Your price | Higher | Lower |
| Reach | Limited to retailers you manage | Broader |
| Logistics | You handle shipping and EDI | Distributor handles much of it |
| Payment risk | Many accounts | One main account |
Many brands use both: direct for big accounts, distributors for long-tail stores.
Step 5: Protect pricing consistency
- Keep MSRP consistent across channels, including your own website.
- Avoid undercutting retail partners online.
- Use a wholesale price sheet with tiers by volume.
- Plan promotions with retailers instead of unilateral discounts.
Common pricing mistakes
- Pricing from cost forward and discovering the shelf price is far above competitors
- Forgetting the distributor, then having no margin left when one becomes necessary
- Ignoring freight, especially on heavy items like ceramic mugs
- Quoting one price for every volume instead of tiered wholesale pricing
- Letting MSRP drift between channels, which frustrates retail partners
- Underestimating allowances, which retailers often deduct from payments
When to raise wholesale prices
Give partners advance notice (often 60–90 days for retailers), explain the reason briefly, and time changes to line reviews or the start of a season when possible. Raising prices mid-promotion damages relationships.
A pricing worksheet
- MSRP: ____
- Retailer margin: _% → retailer cost _
- Distributor margin (if any): _% → distributor cost _
- Your wholesale price: ____
- Landed cost: ____
- Allowances and freight per unit: ____
- Your profit per unit: ____
- Your margin: ____%
If step 8 is too low, adjust cost (larger runs, simpler packaging), channel (direct), or MSRP.
Related guides
- Selling to big-box retailers
- Private label coffee accessories
- Preparing for a retail line review
- Pricing merch in your own café
Lower your landed cost
Affogato Bean quotes branded merch at multiple quantities with design help included, helping you find a landed cost that leaves room in the margin stack. Talk to us.
General information, not financial advice.
Frequently asked questions
What is the difference between wholesale price and MSRP?
Wholesale price is what a retailer (or distributor) pays you. MSRP, the manufacturer's suggested retail price, is the price you recommend the retailer charge consumers.
How much margin do retailers expect?
It varies widely by retailer and category. Many retailers expect margins in roughly the 30–60% range, and distributors add their own margin when they're in the chain. Ask each partner and build your pricing to fit.
How do I calculate wholesale price from MSRP?
Wholesale = MSRP × (1 − retailer margin). If MSRP is $20 and the retailer expects a 50% margin, wholesale is $10. If a distributor sits in between, calculate their price the same way.
Sources
- SPS Commerce, “Case Pack Configuration: How to Build a Pack That Works at Retail.”
Sources checked October 2026. Statistics are reported as published by each source.