Calculating retail prices is not easy. There are multiple variables to factor in and several calculation methods. However, who does not want to reduce uncertainty when choosing the right price for their products?  TradeGecko is here to help.

At TradeGecko, we always recommend the absorption pricing method. This approach factors in all the costs associated with your product's selling price, including the proportion of your fixed costs and your profit margin.

This is a simple 3 step method to get to your RRP (Recommended Retail Price)

How to calculate retail price

  1. Calculate your cost price.
  2. Calculate your wholesale price, by adding up cost and profit margin.
  3. Calculate your RRP (Recommended Retail Price), by multiplying your wholesale price by 2 or 2.5. 

Absorption pricing formula illustration

Retail price calculator


Retail Price

Pros of using this method to calculate your retail price

  • This method is really simple and easy to use. It does not require complex formulas or training. 
  • Profit is (almost) guaranteed. As long as your math is right, you are assured a profit.

Cons of using this method to calculate your retail price

  • It does not take into consideration your competition and their pricing strategy. Price gaps are common when taking this approach. 
  • This method also ignores value perception. Your price could be too aggressive and your customers may end up looking for alternatives in the marketplace.

 

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