A product can sell well and still lose money at retail. The difference usually comes down to costs that were never part of the original pricing, and a margin structure that does not leave room for everyone in the chain.
Know your true landed cost
Landed cost is everything it takes to get one unit ready to sell: manufacturing, packaging, inbound freight, duties and any other cost that touches the product before it ships to a customer. If you are estimating, you are guessing at your margin.
Work backward from the shelf price
Start with the price a shopper will reasonably pay, then subtract what each step in the chain needs to earn. The retailer takes a margin, a distributor may take another, and what remains has to cover your costs and leave you a profit.
- Set a competitive suggested retail price for your category
- Subtract the retailer margin to find your wholesale price
- Subtract distributor margin if you sell through one
- Compare what is left to your landed cost and overhead
Budget for the cost of doing business at retail
Promotions, introductory allowances, damages, deductions and retailer programs all come out of your revenue. Brands that plan for them stay healthy; brands that discover them after the first purchase order are often surprised.
Check your price against the category
If your price is higher than comparable products, be ready to explain why. A premium can work when the difference is clear to the shopper, but it needs to be justified by ingredients, results or brand, not just by cost.