Wholesale Pricing: How to Set Wholesale and Retail Prices That Leave Room for Everyone

If you make or import products and want shops to stock them, your wholesale price decides whether retailers can earn a living selling your goods and whether you can earn one making them. Get it wrong and you either leave money on the table or price yourself out of every store. This guide shows how to calculate a wholesale price from your real costs, how keystone and cost-plus pricing work, the difference between markup and margin, and a full price ladder from factory cost to shelf price. It also covers the two legal issues that come with wholesale: minimum advertised price policies and the Robinson-Patman Act.

Quick answer

Wholesale pricing is the price you charge businesses that buy in bulk to resell. A common formula is wholesale price = landed cost ÷ (1 − your target margin), then retail price ≈ 2 × wholesale (keystone) so the retailer earns about a 50% margin.

• Price from full landed cost: materials, labor, packaging and inbound freight

• Markup is profit ÷ cost; margin is profit ÷ price — a 100% markup is a 50% margin

• Keystone (double wholesale) is a convention in gift and apparel, not a law

• Volume discounts are fine if they reflect real cost savings and are open to competing buyers

• A MAP policy should be your own unilateral policy, never an agreement with competitors

What wholesale pricing means

Wholesale pricing is the price at which goods are sold to businesses that will resell them, rather than to the people who use them. A ceramics studio selling mugs to gift shops, a coffee roaster supplying cafés and grocery stores, and a distributor buying pallets from a manufacturer and breaking them into cases for retailers all sell at wholesale.

Wholesale prices are lower than retail for two reasons. The first is the retailer's margin: a shop pays rent, staff, card fees and marketing, and it needs a gap between what it pays you and what it charges shoppers. The second is your own cost to serve. Shipping one case of 24 mugs to one account costs far less per unit than packing and shipping 24 separate online orders, handling 24 card payments and answering 24 customers' emails.

In a typical consumer goods supply chain there can be up to four prices for the same item: your cost, the distributor price, the wholesale price you charge retailers directly, and the retail price, often published as a manufacturer's suggested retail price (MSRP). Not every business uses all four. A small maker selling direct to boutiques may only have cost, wholesale and retail, but planning the full ladder early stops you from pricing yourself out of distribution later.

Start with your landed cost

Every wholesale price starts with the full cost of getting one sellable unit into your warehouse, often called landed cost. It's built from the same items that go into cost of goods sold on your tax return: purchases of materials or finished goods, direct labor, packaging, and the freight and duties to bring goods in. IRS Publication 334 lists these as the components of cost of goods sold for small businesses, and our cost of goods sold guide shows how to calculate it.

Small brands most often miss these costs:

• Inbound freight and duties. A container from overseas or a pallet from a supplier spreads a real cost across every unit.
• Packaging and labels. Retail-ready boxes, hang tags, barcodes and inner packs add up.
• Your own labor. If you make the product yourself, put a wage on your hours, even if you don't pay yourself yet.
• Shrink and defects. If 3% of production is unsellable, the good units carry that cost.

Selling costs such as outbound shipping, trade show fees, sales rep commissions and payment processing aren't part of landed cost, but they still have to be covered by your margin. That's why it helps to also run the numbers as contribution margin: price minus every variable cost of the sale, not just production cost.

Markup vs margin: the conversion that trips everyone up

Markup and margin both describe profit, but against different bases. Markup is profit divided by cost. Margin (gross margin) is profit divided by the selling price. A product that costs $10 and sells for $20 has a $10 profit: a 100% markup and a 50% margin. Retailers and distributors almost always talk in margin; many makers think in markup. When a buyer says "we need 50 points," they mean a 50% margin, which is a 100% markup on what they pay you.

The formulas are simple. To get price from a target margin: price = cost ÷ (1 − margin). To get price from a markup: price = cost × (1 + markup). To convert: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). If you price at a "50% markup" thinking you're earning half the price, you're actually earning one third, and after shipping and fees possibly much less.

Pricing methods: keystone, cost-plus and market-based

Keystone pricing

Keystone means the retail price is double the wholesale price, a 100% markup and 50% margin for the retailer. It's the default expectation in many gift, home, apparel and accessories shops. Some boutiques now ask for more than keystone, especially for small-batch goods with slower turnover, while categories like groceries, consumer electronics and auto parts run on much thinner margins. Treat keystone as a starting assumption to check with buyers in your category, not a rule.

Cost-plus pricing

Cost-plus pricing sets your wholesale price by adding a fixed markup or margin to landed cost. It's simple, and it guarantees each unit covers its cost, which makes it the right floor for your calculations. Its weakness is that it ignores what customers will pay. If cost-plus gives a retail price far above comparable products, you have a cost problem or a positioning problem, not a pricing problem.

Market-based (retail-back) pricing

Retail-back pricing starts from the price shoppers will pay and works backwards: retail price × (1 − retailer margin) = wholesale price, then wholesale price × (1 − distributor margin) = distributor price. If your landed cost doesn't leave you a healthy margin at the bottom of that ladder, the product isn't ready for wholesale yet.

Most experienced brands use all three: cost-plus to set the floor, retail-back to set the ceiling, and keystone or category norms to check that retailers will accept the gap.

For a sense of how margins differ across the chain, NYU Stern's January 2026 dataset of US public companies shows average gross margins of about 15% for food wholesalers, 31% for distributors, 33% for general retailers and 57% for apparel companies. These are public-company averages, not targets, but they show why a distributor can't take the same cut as a boutique.

Try it — a $6 product at a 100% markup

Cost PriceMarkup

Cost Price₹6.00

Profit per Unit₹6.00

Equivalent Margin50%

Selling Price₹12.00

Open the full Markup Calculator (PDF, save, compare)

A worked price ladder

Here's a full ladder for a hand-poured candle made by a small US brand. The distributor and retailer margins are typical illustrations, not fixed industry figures.

Step 1: landed cost. Wax and fragrance $2.40, glass jar and lid $1.10, label and box $0.70, labor $1.30, inbound freight and shrink $0.50. Total landed cost: $6.00.

Step 2: your wholesale price. You want a 50% gross margin on direct wholesale accounts: $6.00 ÷ (1 − 0.50) = $12.00.

Step 3: retail price. Boutiques in your category expect keystone, so MSRP is $12 × 2 = $24.00, a 50% margin for the shop.

Step 4: distributor price. A regional distributor wants a 25% margin selling to retailers at your $12 wholesale price. It pays you $12 × (1 − 0.25) = $9.00. Your margin on distributor sales is ($9 − $6) ÷ $9 = 33.3%.

The candle price ladder

Level	Price per unit	Who earns what
Landed cost	$6.00	Materials, labor, packaging, freight-in
Distributor price	$9.00	You keep $3.00 (33.3% margin)
Wholesale price	$12.00	You keep $6.00 direct (50%); distributor keeps $3.00 (25%)
Retail price (MSRP)	$24.00	Retailer keeps $12.00 (50% margin)

Landed cost

Price per unit

$6.00

Who earns what

Materials, labor, packaging, freight-in

Distributor price

Price per unit

$9.00

Who earns what

You keep $3.00 (33.3% margin)

Wholesale price

Price per unit

$12.00

Who earns what

You keep $6.00 direct (50%); distributor keeps $3.00 (25%)

Retail price (MSRP)

Price per unit

$24.00

Who earns what

Retailer keeps $12.00 (50% margin)

The ladder tests the whole plan. At $24, is the candle competitive with what shoppers already buy? If the market price is $18, the retailer can only pay $9 at keystone, your direct margin drops to 33%, and a distributor would pay just $6.75, barely above cost. In that case you either reduce cost, sell direct only, or reposition the product.

Volume tiers, minimums and payment terms

Most wholesale price lists have more than one price. Minimum order quantities and case packs protect your margin by keeping orders large enough to be worth shipping. A common setup is an opening order minimum, such as $150 or $250, and products sold in case packs of 6 or 12 units. Volume tiers then reward bigger orders: for example, $12.00 a unit for 1–5 cases, $11.40 (5% off) for 6–19 cases, and $10.80 (10% off) for a pallet.

Build tiers on real savings. A pallet order saves you picking, packing and per-shipment freight, and the discount should be no larger than those savings plus whatever the volume is worth to you. Then check the new margin: at $10.80 on a $6.00 cost, your margin falls from 50% to 44.4%.

Payment terms are a price too. If you offer net 30, you're financing the retailer's inventory for a month. If you offer "2/10 net 30," a 2% discount for paying within 10 days instead of 30, you're paying an annualized rate of roughly 37%: 2 ÷ 98 × 365 ÷ 20 ≈ 37.2%. That can be worth it for cash flow, but it's expensive money, so price it in deliberately. Marketplace platforms for wholesale often charge commissions and offer their own terms, so check your contribution margin per channel, not just per product.

Wholesale vs retail pricing when you sell both

Many small brands sell direct to consumers online and wholesale to shops at the same time. That creates two rules worth following. First, don't undercut your own retailers. If your website sells the candle for $18 while shops are asked to charge $24, your wholesale accounts will stop reordering. Keep your own retail price at or near MSRP and compete on experience, exclusives or bundles instead.

Second, remember that your direct-to-consumer margin isn't free money. Selling one candle online at $24 means paying for packaging, outbound shipping, card fees, returns and ads. Once you subtract those, the "extra" $12 over wholesale may shrink to a few dollars. Many brands find that wholesale's lower margin per unit is offset by lower cost to serve and larger orders.

MAP policies and suggested retail prices

A suggested retail price is exactly that. The FTC says a dealer is free to set its own retail price and can charge the MSRP or something else, as long as it decides independently. A supplier can, however, choose not to deal with retailers that don't follow its pricing policy. The key is that the decision is the supplier's own.

A minimum advertised price (MAP) policy limits the price a retailer may advertise, not the price at which it sells. Brands use MAP to protect retailers who invest in displays and service from being undercut by online discounters. The FTC describes the critical distinction as being between a unilateral decision to impose a restraint, which is lawful, and an agreement, especially among competitors, which isn't. A manufacturer can announce a policy and stop supplying resellers who break it, on a take-it-or-leave-it basis.

Pricing policies and how the FTC frames them

Practice	What it controls	Federal view
Suggested retail price (MSRP)	Nothing — retailer decides	Lawful; the key word is 'suggested'
Unilateral MAP policy	Advertised price only	Generally lawful if imposed and enforced unilaterally
Minimum resale price program	Actual selling price	Rule of reason since Leegin (2007); some states per se illegal
Agreement among competitors on price	Wholesale or retail prices	Illegal price fixing

Suggested retail price (MSRP)

What it controls

Nothing — retailer decides

Federal view

Lawful; the key word is 'suggested'

Unilateral MAP policy

What it controls

Advertised price only

Federal view

Generally lawful if imposed and enforced unilaterally

Minimum resale price program

What it controls

Actual selling price

Federal view

Rule of reason since Leegin (2007); some states per se illegal

Agreement among competitors on price

What it controls

Wholesale or retail prices

Federal view

Illegal price fixing

Since the Supreme Court's 2007 decision in Leegin Creative Leather Products v. PSKS, federal courts judge all manufacturer-imposed resale price programs under the rule of reason, weighing pro-competitive benefits against harm. That's federal law only. The FTC notes that some state antitrust laws still treat minimum price rules as illegal per se, so brands selling nationally should have a lawyer review their MAP policy. MAP programs can also go too far: the FTC challenged MAP policies of five music distributors that barred retailers from advertising discounts even in ads the retailers paid for themselves.

Practical MAP rules that keep you on the safer side:

• Write the policy yourself, publish it to all resellers, and don't negotiate it with any of them.
• Apply it to advertised prices, not in-store or in-cart prices.
• Enforce it the same way for everyone, for example by pausing supply after a set number of violations.
• Never discuss or agree prices with competing brands, and don't let retailers coordinate prices with each other through you.

Robinson-Patman basics: charging different buyers different prices

The Robinson-Patman Act, a 1936 amendment to the Clayton Act codified at 15 U.S.C. § 13, can make it illegal to sell goods of like grade and quality to competing buyers at different prices when the effect may be to substantially lessen competition. It's the law small retailers point to when a supplier gives a big chain a better deal on identical products.

According to the FTC, a violation generally needs all of these: sales of commodities (physical goods, not services) of like grade and quality; sales to at least two buyers at about the same time; at least one sale crossing state lines; and a reasonable possibility of injury to competition, which in cases between competing buyers can be inferred from significant price differences over time. Buyers who knowingly induce or receive an illegal discount can be liable too.

When a price difference can raise Robinson-Patman risk

Step 1

Physical goods of like grade and quality

Step 2

Sold to two competing buyers at about the same time

Step 3

At least one sale crosses state lines

Step 4

Possible injury to competition

Defenses: cost savings or meeting a competitor's price

There are two main defenses. Cost justification allows price differences that make due allowance for real differences in the cost of manufacture, sale or delivery, such as full-truckload versus single-case shipping. Meeting competition allows a lower price offered in good faith to match a competitor's equally low price. The Act also covers promotional allowances: advertising payments, display money, free goods and similar support must be available to competing customers on proportionally equal terms, and you must tell all competing customers they're available.

The law isn't a dead letter. On December 12, 2024, the FTC sued Southern Glazer's Wine and Spirits, the largest US wine and spirits distributor, alleging it charged independent retailers much higher prices than large chains for identical bottles, with discounts and rebates the smaller stores couldn't access. For a small brand, the takeaways are practical: publish one price list and discount schedule, make volume tiers reachable in practice (or offer cost-based alternatives such as pickup discounts), document the cost savings behind your discounts, and offer co-op and display money to all competing accounts on the same proportional basis.

Before you send out your wholesale price list

0/8

• Landed cost per unit includes freight-in, packaging, labor and shrink
• Wholesale margin covers selling costs (shipping, commissions, fees)
• Retail price at keystone (or category norm) is competitive
• Distributor price still leaves you a workable margin
• Minimums, case packs and volume tiers based on real cost savings
• Payment terms and early-pay discounts priced in
• One published price list and discount schedule for all competing buyers
• MAP policy written and enforced unilaterally, if you use one

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Common wholesale pricing mistakes

Pricing from materials only. Leaving out labor, packaging and freight is the fastest way to discover, after your first big order, that each unit loses money.

Confusing markup and margin. A "50% markup" quoted to a buyer who expects 50 margin points means the retailer earns a third less than it planned, and it will push back or walk away.

No room for a distributor. If your wholesale price is only slightly above cost, you can never use distributors or sales reps, who typically take a commission of their own.

Undercutting retailers online. Running your own site below MSRP, or discounting deeply in sales, teaches retailers that your brand isn't worth stocking.

Special deals for one big account. A secret extra discount for one chain that its smaller competitors can't get is exactly the pattern the Robinson-Patman Act targets. Put the deal on your published schedule or justify it with documented cost savings.

Never reviewing prices. Material and freight costs move. Recalculate landed cost at least once a year and give retailers notice before raising wholesale prices.

Official references

• FTC — Price discrimination: Robinson-Patman violationsElements and defenses
• FTC — Manufacturer-imposed requirementsMSRP, MAP and resale price policies
• 15 U.S.C. § 13Text of the Robinson-Patman Act
• IRS Publication 334Cost of goods sold for small businesses

What to do next

Calculate your landed cost for your top three products, then run each through the markup calculator to see your wholesale price and margin at keystone. Check per-channel profit with our contribution margin guide and, if you sell on marketplaces, the marketplace profit calculator. If you're sourcing finished goods to sell under your own brand, our white label guide covers working with manufacturers.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is wholesale pricing?

Wholesale pricing is the price a maker or distributor charges businesses that buy in bulk to resell, rather than the price a shopper pays. It's lower than retail because the retailer needs room for its own margin, and because selling in cases or pallets to a few accounts costs less per unit than selling one item at a time. Many consumer brands set wholesale at about half the suggested retail price.

How do I calculate my wholesale price?

Start from your full landed cost per unit, including materials, labor, packaging and inbound freight. Divide it by one minus your target gross margin: with a $6 cost and a 50% target margin, $6 ÷ 0.5 = $12. Then check the other direction: if retailers in your category expect a 50% margin, your retail price is $24. If that's too high for shoppers, cut costs or rethink the product.

What is keystone pricing?

Keystone pricing means setting the retail price at double the wholesale cost, a 100% markup that gives the retailer a 50% gross margin. A shop that buys a candle for $12 sells it for $24. It's a common starting point in gift, apparel and home goods, but it's a convention, not a rule; grocery, electronics and auto parts usually work on much lower margins.

What is the difference between markup and margin?

Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A product that costs $10 and sells for $15 has a $5 profit: a 50% markup but a 33.3% margin. Mixing them up is one of the most common pricing mistakes, because a 50% markup leaves far less profit than a 50% margin.

Is a minimum advertised price (MAP) policy legal?

Generally yes under federal law, if the supplier adopts it on its own and enforces it unilaterally, for example by stopping supply to resellers who advertise below MAP. Since the Supreme Court's 2007 Leegin decision, federal courts judge minimum resale price programs under the rule of reason. Some states treat minimum price rules as illegal per se, and an agreement among competing retailers or manufacturers to fix prices is illegal.

Can I charge different wholesale prices to different retailers?

Sometimes. The Robinson-Patman Act can make it illegal to sell goods of like grade and quality to competing buyers at different prices where that harms competition. Price differences are usually defensible when they reflect real cost savings, such as cheaper delivery for full-truckload orders, or when you're meeting a competitor's price in good faith. Publishing one discount schedule open to all buyers lowers the risk.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Price discrimination: Robinson-Patman violations — Federal Trade Commission · accessed 9 October 2026
2. 2.Manufacturer-imposed requirements — Federal Trade Commission · accessed 9 October 2026
3. 3.FTC sues Southern Glazer's for illegal price discrimination — Federal Trade Commission · accessed 9 October 2026
4. 4.15 U.S. Code § 13 — Discrimination in price, services, or facilities — Legal Information Institute (Cornell Law School) · accessed 9 October 2026
5. 5.Publication 334 (2025), Tax Guide for Small Business — IRS · accessed 9 October 2026
6. 6.Margins by sector (US), January 2026 — NYU Stern — Aswath Damodaran · accessed 9 October 2026