What is Retail Pricing? 8 Strategies for Fashion Brands

Getting your retail pricing right is one of the vital keys to building a successful fashion retail business. Why is this important? 

On the one hand, if you price your products too low, you will surely make good sales but, your business will eventually suffer cashflow problems. Plus, making profits would be almost out of the equation. 

On the other hand, if your retail prices are insanely high, you’d struggle to make sales and your business might eventually crumble. 

None of those outcomes is favorable. 

How then do you figure out the right retail selling price for your apparel products? Well, that’s what this post is about. 

Shortly, we will share some battle-tested retail pricing strategies that ensure you make the most sales without jeopardizing your profit margin

But first, what is retail pricing, why is it important, and what factors influence it? Let’s dive right in!

What Are Retail Prices

Put simply, a retail price is the price at which you sell products to direct consumers. It’s different from wholesale price in that you are selling to people who will actually use the product and not resell them. 

What Is Retail Pricing And What Does It Mean?

retail pricing strategy

What is the meaning of retail pricing? In the simplest sense, retail pricing is the act of setting the price at which you sell your product to consumers who will use the product and not resell it. This is in contrast to wholesale prices in which you sell to a reseller. 

Retail prices comprise two major components: the cost of the product and the retail markup. 

The cost of the products includes the cost of the product itself plus other operational costs, such as logistics, storage, labor, etc. 

Retail markup connotes the percentage profit you wish to make for each product you sell. For example, if the total cost of a product is $20 and you add a 30% retail markup to it, the total retail pricing will come out at $26.

Streamline your processes with a tailor-made inventory management solution.

Why Is It Important to Get Your Retail Prices Right?

Finding the right balance for your retail pricing strategy is very important for many reasons. If nothing else, it helps you optimize your profits and sales income. Other than that, employing the right retail pricing strategy enables you to stay competitive amidst fierce market competition, while still amassing a lot of sales. So by all means, put some thoughts into your retailers pricing strategy. 

Let’s get into more details. 

Helps You Maximize Profits

Your primary goal for getting into business in the first place is to make profits, isn’t it?  Calculating your retail pricing is a key driver in achieving this objective. 

By carefully analyzing your costs, including production, acquisition, marketing, and overhead expenses, you can determine the minimum price necessary to cover your costs and achieve the desired profit margin.

Calculating your pricing ensures you don’t inadvertently sell products at a loss. It also helps you identify opportunities for maximizing profitability.

Gives You a Competitive Advantage

Pricing plays a significant role in differentiating your business from competitors, whether it is retail or wholesale pricing. By calculating your retail pricing, you can assess the market landscape and competitors’ pricing strategies. 

This knowledge empowers you to position your products in a way that attracts customers and provides value while remaining competitive. 

Furthermore, proper pricing analysis allows you to identify opportunities for offering competitive pricing, promotions, or unique value propositions that set your business apart from others in the market.

Improves Customer Loyalty

Pricing plays a significant role in differentiating your business from competitors. By calculating your retail pricing, you can assess the market landscape and competitors’ pricing strategies. 

This knowledge empowers you to position your products in a way that attracts customers and provides value while remaining competitive. 

Furthermore, proper pricing analysis allows you to identify opportunities for offering competitive pricing, promotions, or unique value propositions that set your business apart from others in the market.

Factors Affecting Retail Pricing

Internal Factors

Internal factors are variables within your control that influence your retail price. They include labor, marketing, logistics and storage, and many others. 

The manufacturer/supplier you source products from can also influence your retail prices significantly.

External Factors

External factors play more significant roles in determining your retail prices than internal factors. They are hardly within your power to control. 

Notable external factors that affect retail prices include market competition, government regulations and policies, market trends, consumer behavior and preferences, and many more.

How to Calculate Your Retail Prices

The simplest way to calculate the retail price of your products is by adding markup to the unit cost of the product. 

Mathematically speaking: 

Retail Price =  Unit cost of product + Markup

The markup here implies the average profit you wish to make on a product each time you make a sale. 

How do you determine your markup?

One easy way to do that is by using a profit margin calculator.

What is Retail Pricing Strategy?

Otherwise known as retail pricing system, retail pricing strategy refers to the method you use to determine the price of your products. Your retailer’s pricing strategy can make or break your retail store, so you have to choose it wisely. 

8 Retail Pricing Strategies for Apparel and Retail Businesses

Now you’ve seen what retail pricing is all about and why getting it is super important, let’s now see some of the strategies to go about it.

1. Manufacturer Suggested Retail Price (MSRP)

MSRP pricing strategy is exactly what the name implies: pricing your products based on the suggestion of a manufacturer. The suggested price takes into account the unit cost of the product and the markup a manufacturer feels is fair for everyone. 

As you might have guessed, the goal of this pricing strategy is to keep product prices fairly uniform in the market. 

The upside to using recommended retail prices for your products is that saves you the headache of constantly monitoring market trends and sneaking up on your competitors to set your price. Prices are regulated by the manufacturer, so there’s no need for that. That way, you’d have enough time to focus on growing and expanding your business. 

The downside, however, is that you can’t use price as a differentiating advantage over your competitors. So it might not be a good fit if you have an ambitious plan for your business. 

Secondly, pricing your products way beyond the recommended price points can get you into trouble with the manufacturer, and can lead to a failed business relationship.

2. Keystone Pricing

Keystone pricing is loosely based on MSRP. It involves selling products twice the amount you bought from a supplier or manufacturer. 

So if you buy a product for, say, $50, you’d sell it for $100. 

Using the keystone pricing strategy for your business means you don’t have to give so much thought to your product prices. Just double whatever you pay to your manufacturer and you are fine. 

Nonetheless, this pricing strategy has a major pitfall: you might end up overpricing your product and drive away your customers. This is particularly true if you sell mass-produced apparel products that are readily available in the market. 

Another downside is that it can make you undersell your products, especially if they are custom-made. 

Keystone pricing is an ideal option if you sell products with limited availability and yet unique in their own right. 

3. Cost-based Pricing

Cost-based pricing involves setting prices based on the costs incurred in producing or acquiring a product, along with a desired profit margin. 

This approach ensures that all costs are covered and provides a baseline for profitability. However, it does not take into account factors such as market demand or customer perceptions of value.

To put it in another perspective, cost-based pricing involves determining your product cost and adding whatever profit margin you want to it. It’s your call. 

So if you buy a product for $50, spend $10 to procure, store, and ship it, you will sell it for $90 at a markup of 50%. 

Let’s break it down: 

Total product cost = $50 + $10 = $60. 

Markup = 50% * 60  = $30

Retail price = $90.

When determining your retail prices based on the cost-based pricing technique, it’s important to observe market trends and check your competitors’ prices. 

Selling way above the market average price point can drive away customers and force you out of business. 

4. Value Based Pricing Strategy

Value-based pricing revolves around setting prices based on the perceived value of a product to customers. 

It considers factors such as quality, benefits, uniqueness, and customer preferences. By focusing on the value delivered, you can set higher prices and attract customers who are willing to pay for premium offerings.

Value-based pricing is common with luxury products. 

Case in point: Exotic wristwatches. 

While the actual cost of these watches can be anywhere between $200 to $1000, they can sell for as much as $100,000. Sometimes way more. 

It’s actually not the product people buy but the brand, and so are willing to pay through their nose to get it. 

Value-based pricing works well when you sell products from a brand people perceive as valuable. It hardly works on common products consumers perceive as less valuable. 

5. Psychological Pricing

If you can’t get consumers to perceive your products as highly valuable, get them to believe you are offering the best deal ever. 

How do you achieve this? 

Peg your prices on odd numbers like 7,9,11. 

Better yet, use the good old, yet effective, trick of slashing a cent off your price. So, rather than sell your product for $10, sell it for $9.99. 

$5.99 instead of $6. On and on like that. 

By doing so, you’d be psyching them into believing they are making some huge savings. This will make them buy your products out of impulse. 

This is what psychological pricing is all about.

Connect with retailers across the globe and enjoy a smoother wholesaling experience with Uphance's B2B platform.

6. Dynamic Pricing

Dynamic pricing involves adjusting prices in real-time based on factors such as demand, time of day, seasonality, and customer segment. 

This strategy leverages data analytics and pricing software to optimize prices and maximize revenue. It allows you to respond to market fluctuations and capture maximum value based on customer willingness to pay.

7. Penetration Pricing

When you want to penetrate the market with a new product, the smartest thing to do is to reduce your prices as much as possible to attract customers. 

In fact, you could even take things a bit further by offering customers irresistible who discounts and rebates. You can think of this as a discount pricing strategy.

Penetration pricing strategy

Then as your product starts to build momentum in the market, you start increasing their prices to make sizable profits. 

This is what penetration retail pricing strategy is all about. 

Leveraging this retail pricing method can save you the money you’d have otherwise spent on marketing and ads. This is because if your products are of good quality and shoppers can get them cheaply, they will naturally spread positive words around about them. 

A note of caution though. You might drive away customers when you eventually start to increase your prices. So apply this pricing strategy with caution.

8. Competitive Pricing

If you wish to stay ahead of your competitors, you’d have to sell your products at the lowest possible price. 

To achieve this, you have to apply a competitive pricing strategy. This will require you to regularly monitor prices across board to optimize your pricing strategy. 

Done right, this pricing technique can position you as a market leader. 

On the flip side, lowering your prices to a very low point to beat the market competition can have dire repercussions. 

One is that making profits can become incredibly hard. Second is that customers can start to perceive your products as low quality. 

So when applying the competitive pricing strategy, also do so with caution.


As you’ve seen, getting your retail pricing right is important if you want to grow your business and enjoy financial gains while at it. 

All you have to do now is to pick any of the 8 right retail pricing strategies we’ve shared here. 

And of course, you can always combine two or more strategies, depending on the unique needs of your business.

Table of Contents