When you’re running a business, you want to be competitive, fair and still make a buck. These things can be accomplished in the way you set retail prices. Setting retail prices is not some magical mystery task. All it takes is a little common sense and a few calculations. You can set retail prices with a few simple tips.
Things You'll Need
- Invoice for your merchandise
Calculate how much an item actually costs you. If you paid $10 for a box of 10 pairs of socks, that makes each pair $1, right? Wrong. Don’t forget, any shipping, handling, packing charges and tax that may have been mixed in. Check out your merchandise’s invoice to see how much each of those items came to. If your $10 carton of socks cost $7 to ship and included $3 in tax, you really paid $20 for 10 pairs of socks. That means each pair cost you $2.
Decide the least amount of profit you are willing to make. Doubling the cost is one easy way to set retail prices, making your socks $4 per pair. But it’s also greedy and can drive off customers if you are in a competitive market where they can find the same socks cheaper.
Gauge other retailer’s prices for the same or similar items. Browse through similar local stores or online to see how much other folks are charging. If you go above and beyond the going rate, people are sure to notice and shop elsewhere.
Go back to your sock cost and calculate your increase to set retail prices. Say you saw similar socks at $3 per pair, but they were cheaply made and yours are finely woven wool. But you also want to give customers a break to make sure they keep coming back for your fair and competitive pricing. Thus, make your socks something like $3.50 per pair, just a shade above the cheapo socks for a much better item. People will notice.
Do the math. If you’d rather just increase your wholesale cost to retail prices across the board with one set formula, you can multiply by the percentage you want to raise the price. For instance, multiplying your $2 sock by one and adding it to your cost will give you an increase of 100 percent. Thus, your socks are $4. If you want to raise your prices by 50 percent, multiply by 1.5, the one being the cost of the socks and the .5 representing 50 percent. This gives you a $3 retail price. Your $3.50 price is raising the $2 wholesale price by 75 percent. Try it. Multiply $2 by 1.75.