Frequently asked questions
What is wholesale margin?
It is the share of the wholesale price that is profit after your cost.
What is the formula for wholesale margin?
Margin = (wholesale price − cost) ÷ wholesale price × 100. With a wholesale price of 60 and a cost of 40, margin is 33.3% and profit per unit is 20.
How is margin different from markup?
Markup divides profit by cost, and margin divides it by price. In this example the markup is 50% while the margin is 33.3%.
What is a good wholesale margin?
It is often lower than a retail margin because volumes are larger. Many wholesalers work in the range of 20% to 40%, but it depends on the industry.
Should my cost include shipping?
Yes. Include any freight, packaging and handling you pay, otherwise your real margin is lower.
How do volume discounts affect margin?
Each discount tier lowers the price, so recalculate the margin at every tier to keep larger orders profitable.
How do payment terms affect profit?
Terms such as net 30 or net 60 tie up your cash. Consider the financing cost, or offer an early payment discount.
Do returns and chargebacks matter?
Yes. They reduce your real margin, so allow for them in your pricing.
How does wholesale margin compare with retail margin?
Selling direct earns a higher margin per unit but needs more effort in marketing, fulfilment and customer service.
Does this include operating costs?
No. It is a gross margin. Net margin is lower after rent, wages and other expenses.
How do I find total profit?
Multiply profit per unit by the number of units sold.
What if my margin is too low?
Raise the price, reduce your cost, set a minimum order size or stop selling the product.
How does this relate to the retailer's margin?
The retailer earns its own margin between the wholesale and retail price. The two margins are measured on different prices.
Do exchange rates matter for exports?
Yes. If you sell or buy in other currencies, check your margin when rates change.
How often should I review my margins?
When costs, competitors or customer terms change, and at least once a year.