Looking to get into wholesaling but have yet to figure out your wholesale prices? Or maybe you sell wholesale already but are having a hard time balancing your wholesale pricing strategies to make profits without disrupting your supply chain. Either way, this post is for you.
Selling wholesale to other apparel retail businesses has several benefits. If nothing else, it gives you the opportunity to push out more inventory, thus minimizing overstocking. And it can be highly profitable. However, you have to get your wholesale price correctly to enjoy these benefits.
You have to factor in several variables when you want to calculate wholesale and retail prices for your business. This includes shipping costs, profit margins, market trends, overhead costs, etc.
In this post, we will dive a bit deeper into these variables. In addition, we will show you how to accurately calculate wholesale prices across your sales channels quickly and efficiently. Let’s dive right in.
In the world of commerce, the term “wholesale price” is often used to describe the cost of goods when purchased in large quantities. Wholesale pricing is used in many industries, including the apparel industry, where it plays a crucial role in determining profit margins and pricing strategies.
Wholesale price is the cost of goods sold to retailers or other businesses that purchase products in large quantities. Wholesale prices are typically lower than retail prices because they are intended for resale at a markup. Wholesale prices are negotiated between manufacturers, suppliers, and distributors, based on the quantity of goods purchased.
Retail price is the price that the end consumer pays for a product, while the wholesale price is the cost that retailers pay for the same product. Retailers purchase goods at a wholesale price and then add a markup to that price to cover their overhead costs and generate a profit. This markup is what creates the difference between the wholesale and retail prices.
Wholesale pricing plays a crucial role in determining your overall pricing strategy. When you buy apparel products at a lower wholesale price, you will find it easy to sell those products at a lower retail price, giving you a competitive advantage in the market. But if you buy at a higher wholesale price, you may need to charge a higher retail price to maintain profitability.
Selling your apparel products at a wholesale price can boost profits and help you stand out in a fiercely competitive apparel industry.
Other benefits of selling products wholesale are as follows:
One of the most significant benefits of purchasing apparel at wholesale prices is the lower cost of goods. By buying in bulk, you can negotiate better prices from you suppliers and manufacturers, which leads to a lower cost per unit. This, in turn, allows you to price your products more competitively in the market and increase their profit margins.
Another benefit of wholesale purchasing is that it gives apparel businesses greater control over their inventory. When businesses purchase their products at wholesale prices, they can purchase larger quantities of the items they know will sell well, and avoid stocking items that are not selling as quickly. This allows businesses to minimize their inventory costs and optimize their profits.
When businesses purchase products at wholesale prices, they establish a long-term relationship with their suppliers. This can lead to improved communication, faster order processing times, and better overall service. These benefits can help businesses build a reputation for reliability and consistency, which can lead to increased customer loyalty and repeat business.
Many apparel businesses are still stuck with manually tracking multi-channel inventory across different software and even spreadsheets. This approach is, however, redundant, time-consuming, and error-prone. Without a centralized platform for tracking your apparel operations, you risk losing sight of how changes in one area affect another. Also, without centralized tracking, you’re less likely to leverage real-time monitoring and tracking of changes across your business.
You can fix this by adopting an inventory management solution that caters to your multi-channel needs and includes a centralized tracking system.
Calculating wholesale prices is an essential skill for any business owner or entrepreneur in the apparel industry.
Luckily, calculating your wholesale prices isn’t rocket science – you just need to understand the fundamentals.
That said, here are the steps to developing a wholesale pricing strategy that works.
The first step in calculating your wholesale price is to determine your costs. This includes the cost of materials, labor, and overhead expenses. Be sure to factor in any shipping or handling costs as well. You can use a spreadsheet or accounting software like Quickbooks.
Once you’ve determined your costs, the next step is to calculate your profit margin. This is the amount of profit you want to make on each product. A good rule of thumb is to aim for a profit margin of at least 20%, but this can vary depending on your business goals and the competition in your market.
To calculate your profit margin, subtract your costs from the desired retail price, then divide by the desired retail price. For example, if your costs are $10 per unit, and you want to make a 20% profit, your profit margin will come out at $2.
An easy way to do all these is by using our profit margin calculator tool.
Next, you need to determine your markup, which is the percentage increase from the wholesale price to the retail price. This is calculated by dividing the difference between the retail and wholesale prices by the wholesale price and multiplying by 100. For example, if your wholesale price is $15, and your retail price is $20, your markup would be calculated as follows:
Markup = ((Retail price – Wholesale price) / Wholesale price) x 100 = ((20 – 15) / 15) x 100 = 33.33%
Now that you’ve determined your costs, profit margin, and markup, you can calculate your wholesale price. To do this, you need to subtract your desired profit margin from the retail price, then multiply by the markup percentage. For example, using the numbers from earlier, your wholesale price would be calculated as follows:
Wholesale price = ((Retail price – (Costs / (1 – Profit margin))) x Markup percentage) + Costs = ((20 – (10 / (1 – 0.5))) x 33.33%) + $10 = $12.67
When it comes to selling clothing wholesale, determining a good profit margin is essential for the success of your business. A profit margin is the amount by which the wholesale price of a product exceeds its cost, and it’s a key metric that can determine the overall profitability of your business.
A good profit margin for selling clothing wholesale depends on several factors, including your business model, overhead costs, and the level of competition in your market. Generally, a profit margin of 50% to 60% is considered good for selling clothing wholesale. This means that the wholesale price of your product should be at least twice the cost of production.
For example, if it costs you $20 to produce a shirt, a good wholesale price would be $30 to $36. This allows you to make a significant profit while also keeping your prices competitive in the market.
Struggling to figure out the right profit margin for your wholesale business? The tips below can help.
Negotiating with your suppliers is a great way to lower your costs and increase your profit margin. By purchasing in bulk, you can often negotiate better prices with your suppliers and improve your profit margins.
Overhead costs, such as rent, utilities, and insurance, can eat into your profit margins. Look for ways to reduce these costs, such as sharing office space or switching to energy-efficient lighting.
Offering customization services, such as screen printing or embroidery, can help you increase your profit margins by charging more for each product.
Keeping up with the latest trends in the apparel industry can help you stay competitive and charge higher prices for your products. By offering unique and trendy designs, you can differentiate yourself from your competitors and increase your profit margins.
One of the toughest parts of wholesaling is convincing prospective customers to buy from you. It gets even harder if you don’t have the right set of tools.
To this end, you need to arm yourself – and your sales team – with a line sheet. A line sheet, basically, is a marketing material that contains vital information about your product, such as product prices, quantity, colors, etc.
Designed properly, they make it easy for prospective buyers to see exactly what they are buying, increasing your chances of making a sale.
Thankfully, you can easily knock out a fancy line sheet quickly with Uphance.
Find out more about Uphance pricing here.
Selling your apparel products at a wholesale price can be a major game changer for your brand. It can help boost your profits, expand your customer base, and cut through market competition.
However, your success is hugely dependent on your ability to calculate your wholesale price to make profits while still offering competitive prices.
Hopefully, with all we’ve shared in this post, that wouldn’t be much of a problem for you.
Looking for a complete ERP solution for your apparel business that allows you to manage every aspect of your business and automate repetitive processes? Uphance is your sure bet.
Schedule a demo right away to take Uphance for a spin.