You can sell the best Amazon FBA products in the world, but if they’re not priced properly, they’ll never leave the shelves. Fortunately, learning to price wholesale products isn’t too much of a challenge. With the right strategies and knowledge, you can learn how to master wholesale product pricing for your Amazon FBA business.
Understanding Wholesale vs. Retail Price
When you buy wholesale products (as an Amazon FBA seller), you’re paying what’s known as the wholesale price. Understanding the differences between what you pay and what you should charge customers is a key part of maximizing your profits. Let’s take a look.
What is Wholesale Price?
An item’s wholesale price is what manufacturers charge retailers (like you) to buy products in a larger volume. You might also buy wholesale products from distributors like Nex Deal Inc.
What is Retail Price?
Retail pricing is what sellers like you set as the cost customers must pay to order an item. This price is up in the air, and it’s what you’ll need to determine based on your business expenses and goals. Your retail price will be a markup of the product’s wholesale price so that it can help you turn a decent profit.
How to Calculate Wholesale Pricing Like a Pro
Once you’ve ordered wholesale merchandise, it’s time to establish your prices. Here’s how you can calculate a wholesale price effectively.
1. Do some research.
Conduct some niche research to analyze your market and where your products will fit into it. Knowing your brand and goals helps here. For instance, are you aiming to sell designer products or budget-friendly finds?
Figure out which keywords, product categories, niches, etc., are applicable to you so you know what to use as a basis for comparison.
2. Calculate the Cost of Goods Manufactured.
Your cost of goods manufactured (COGM) represents the total cost of purchasing or producing a product. That includes materials, labor, and any additional costs that come into play. You can calculate your COGM using this formula:
Total Material Cost + Total Labor Cost + Additional Costs + Overhead Costs = Cost of Goods Manufactured
If you’re purchasing wholesale merchandise from a seller like Nex Deal Inc., you won’t necessarily have labor costs or many additional fees.
3. Determine your profit margin.
With your COGM handy, you can calculate your ideal profit margin. First, multiply your COGM by two. That way, you’ll ensure your profit margin is at least 50%. As you experiment with different price options, use this formula to keep an eye on your retail profit margin:
Retail Price – Cost / Retail Price = Retail Margin Profit %
Don’t forget to consider things like Amazon FBA fees when considering costs and prices.
4. Create your wholesale price.
Select wholesale pricing that gives you a reasonable profit margin. 30-50% is typical for most wholesale sellers, but you can aim for a higher percentage if you want. Just be sure you understand how your prices compare to the competition’s. If you’re the priciest product out there, you had better have a good reason for it!
Types of Wholesale Pricing Strategies to Consider
Simplify things by adopting a wholesale price strategy that matches your goals. There are two main options to consider:
This option factors in all costs associated with a sale, including fixed cost and profit margins. All of the product’s costs are “absorbed” into its final cost. To use this method, calculate your price using this formula:
Wholesale Price = Cost Price + Profit Margin
This method is great for quick and easy pricing. Plus, you’re more likely to turn a good profit if all of your expenses are accounted for.
This method focuses on calculating the demand for wholesale products. That means that different buyers will pay different prices based on different circumstances.
You might also hear differentiated pricing referred to as “time-based” or “demand” pricing. It embraces the idea that buyers shape prices, not sellers, based on market conditions. There is no set formula for this option; instead, you’ll calculate costs based on what you observe.
Where to Find Wholesale Merchandise Deals
No matter the pricing strategies you choose, you’ll need quality wholesale products that customers actually want to buy. Count on Nex Deal Inc. for exciting and fresh daily wholesale deals that will zhuzh up your product offerings. Or, download a complete list of our inventory to see even more options. We’re here with you through every step of building an Amazon FBA business you’re proud of.