Direct answer
How do I work out wholesale margin?
Work out your landed cost per unit first, then subtract it and every cost that exists only at wholesale from the wholesale price. That is your contribution per unit. Check the second margin at the same time: the retailer's margin is the suggested retail price minus your wholesale price, divided by the retail price. A wholesale price has to pass both tests, because one that leaves you nothing is a busy year and one that leaves the retailer nothing gets no orders.
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Wholesale is a different cost structure, not a discount
The first wholesale order usually looks like the same product at half the money. It is not. Selling through a retailer removes some of your costs and adds others, and the two sets rarely cancel out. Treating the wholesale price as a discounted retail price is how a brand ends up busier, with more units moving, and no more money at the end of the quarter.
What usually goes away: the cost of picking and shipping one unit to one consumer, the payment fee on a small basket, the consumer discounting, and a share of the advertising that had to find that consumer. What usually arrives: freight on a larger consignment, case packing and labelling to somebody else's specification, samples that are never paid for, an agent or distributor cut where you use one, and the cost of waiting to be paid.
None of that makes wholesale a bad channel. It makes it a channel with its own arithmetic, and the arithmetic has to be done on your numbers before the price goes on a line sheet, not after a buyer has agreed to it.
Start with landed cost, not the supplier invoice
Landed cost is what a unit costs you by the time it is sitting on your shelf ready to sell. The supplier invoice is only the first line of it. Add inbound freight, any duty or import charges, insurance, inspection, and the rework or repackaging you do before a unit is saleable.
Divide by the units you can actually sell, not the units you ordered. If a consignment of 1,000 arrives with 40 damaged, your landed cost per saleable unit is the total divided by 960. Brands routinely skip that step and then wonder why the margin on paper never appears in the bank.
Allocate one-off costs honestly rather than generously. A mould, a plate, a photoshoot or a compliance test is real money, and spreading it over an optimistic lifetime volume is the most common way a wholesale price gets set too low.
- Unit cost from the supplier, in your own currency at the rate you actually paid
- Inbound freight and insurance, per unit of the consignment
- Duty, customs clearance and any broker fee
- Inspection, rework, relabelling and repackaging before sale
- Damages and shortages, by dividing over saleable units rather than ordered units
- Tooling, artwork and compliance testing, allocated over a volume you can defend
Two margins live on the same line, and both have to pass
The line sheet prints two numbers beside each other: your wholesale price and a suggested retail price. Each one carries a margin, and they belong to different people.
Your contribution per unit is the wholesale price minus your landed cost minus the costs that exist only because this is a wholesale order. The retailer's margin is the suggested retail price minus your wholesale price, divided by the suggested retail price. Divide by the retail price, not by your cost: that is margin, and it is the number a buyer reads. Dividing by cost gives markup, which is a larger number describing the same deal, and the two get confused often enough to ruin a conversation.
A wholesale price that passes your test and fails the retailer's gets no orders. One that passes the retailer's test and fails yours gets orders you will come to resent. Both tests are run on the same candidate price, before it is printed, and the price only survives if it clears both.
The costs that only exist at wholesale
Most of these are small on their own and material together. The reason to list them is that each one is easy to leave out of a quick calculation, and a quick calculation is what most first wholesale prices are built on.
Freight is the one worth settling in writing. The International Chamber of Commerce publishes the Incoterms rules, a set of eleven three-letter trade terms that state, for each one, which of the buyer and the seller carries which obligations, costs and risks. Naming the term on the sheet is how you stop a conversation about who pays for a pallet after it has already shipped.
Payment terms are the cost people forget, because the money arrives eventually and the waiting looks free. It is not free: the cash is out of your business while it waits, and if you are funding stock in the meantime the interest is a real per-unit cost. In the European Union, Directive 2011/7/EU on combating late payment limits business-to-business contractual payment periods as a general rule to 60 calendar days, with the default falling at 30 calendar days from receipt of the invoice, and allows a longer agreed period only where that is not grossly unfair to the creditor. Your own jurisdiction may differ, and the point here is commercial rather than legal: a term you agree to is a number you should have priced.
- Outbound freight, and the Incoterms rule that decides who carries it
- Case packing, cartons, pallets and any labelling to the buyer's specification
- Samples, which are units at landed cost that produce no revenue
- Trade show costs or an agent or distributor commission, allocated per unit sold
- The cost of waiting for payment, priced at what the money costs you
- Damages, shortages and any agreed allowance for unsold stock
- Barcodes, compliance documents and artwork changes a specific retailer requires
Worked example: one bag of coffee, two channels
The figures below are invented and the currency is deliberately unnamed. What matters is the shape: the same unit, run through both channels, with every cost written down rather than assumed.
A 250 g bag, sold direct and sold wholesale
Landed cost per saleable bag: 180. That is the roasted coffee, the bag, the label, inbound freight and the allowance for damaged stock, divided over units that can actually be sold.
Direct to a consumer at 600: subtract landed cost 180, payment fee 12, pick and pack 25, shipping to the door 90, and an average discount of 30. Contribution per bag: 263.
Wholesale at 300 a bag, cases of 12, suggested retail 600: subtract landed cost 180, case packing 8, the freight share you pay 15, samples and trade costs allocated at 10, and 3 for thirty days of waiting to be paid. Contribution per bag: 84.
The retailer's margin at the suggested retail price is 600 minus 300, divided by 600, which is 50 percent. That is the number the buyer is deciding on, and it is the reason the wholesale price cannot simply be raised until your own margin looks better.
So one direct sale is worth about 3.1 wholesale bags, and a case of 12 is worth about 3.8 direct sales. Whether that is a good trade depends on how many cases a retailer reorders and how much it costs you to find the next one, which is a question about the size of the account rather than about the unit.
The figures are illustrative. They are not a benchmark, a recommended price, or anyone's results. Run the same two columns on your own landed cost before you quote anything.
How many wholesale units replace one direct sale
The comparison above generalises into one division that is worth doing before any channel decision. Take your contribution per unit on the direct channel, divide it by your contribution per unit at wholesale, and you have the number of wholesale units that replace one direct sale.
That number is the honest size of the bet. If it comes out near one, wholesale is close to free money and the only question is capacity. If it comes out at five, the channel only works when accounts reorder, because five times the volume has to come from somewhere and it will not come from one-off orders.
The same division tells you what a reorder is worth. A retailer who orders once is a marketing cost with a small margin attached. A retailer who orders four times a year is the thing that makes the channel work, which is why qualifying for fit matters more at wholesale than the size of the first order does.
Qualify for the reorder, not the first order covers the fit signals that separate a shop that will buy again from one that will buy once.
Price the terms as well as the product
Three things you agree to in a first order are prices in disguise: the payment terms, the freight term, and anything you promise about unsold stock. Each one moves money out of your side of the deal without appearing as a discount.
Thirty days of credit on a 300 unit price costs a small amount per unit and a large amount across a season if you are funding stock to supply it. Free freight on a small order can be worth more than the margin on the order. An agreement to take back what does not sell converts your finished goods into the retailer's option, and options have a price.
Say the terms once, in the same place, and hold them. Reissuing a price a buyer has already shown to their own team is expensive in a way that a discount is not. Nothing on this page is legal, tax or accounting advice, and the treatment of credit, duty and returns varies by country and category.
What this arithmetic cannot tell you
It cannot tell you whether a shop will reorder, and that is the variable the whole channel turns on. Contribution per unit is knowable in advance; lifetime value of an account is not, and anyone quoting you an industry average for it is describing someone else's business.
It also cannot price the things wholesale buys that are not margin: shelf presence, the credibility of being stocked somewhere respected, and the product feedback you get from a buyer who says no and tells you why. Those are real and they are not in the equation, so treat the equation as the floor the decision has to clear rather than the decision itself.
The two facts cited here are narrow ones: that the Incoterms rules are eleven trade terms allocating obligations, costs and risks between buyer and seller, and what Directive 2011/7/EU says about business-to-business payment periods in the European Union. Everything else is commercial convention and arithmetic you should run on your own numbers.
Sources and definitions
Related resources
Frequently asked questions
What is the difference between margin and markup?
Margin divides the money you keep by the selling price. Markup divides the same money by the cost. A unit that costs 300 and sells at 600 carries a 50 percent margin and a 100 percent markup, which are two descriptions of one deal. Retail buyers work in margin on the retail price, so quote margin when you are talking to them and be explicit about which one you mean.
How much margin does a retailer need?
It varies by category, country and channel, and no single number is a rule. The convention you will meet most often is that suggested retail is roughly double the wholesale price, which puts the retailer near 50 percent of retail. Treat that as a sanity check on your own price rather than a target, and check what comparable products in the same shops are actually priced at before you set yours.
Is wholesale worth doing if the margin per unit is half?
It depends on volume and reorders, not on the per-unit number. Divide your direct contribution per unit by your wholesale contribution per unit to see how many wholesale units replace one direct sale, then ask whether a realistic account orders that much in a year. Wholesale earns its place when accounts reorder; it rarely does on one-off orders alone.
Who pays the freight on a wholesale order?
Whoever the agreed term says, which is why the term belongs on the line sheet in writing. The International Chamber of Commerce publishes the Incoterms rules, eleven three-letter terms that set out which obligations, costs and risks sit with the buyer and which with the seller. Naming one is faster than describing the arrangement in a sentence, and it prevents an argument after the pallet has moved.
What payment terms should I offer a first retail buyer?
Whatever you have priced. Credit is a cost you carry, so if you offer 30 days, the money the cash costs you for those 30 days belongs in the unit calculation before the price is printed. In the European Union, Directive 2011/7/EU limits business-to-business payment periods as a general rule to 60 calendar days and sets a default of 30 days from receipt of the invoice. Rules differ elsewhere, and this is commercial guidance rather than legal advice.
Do CarryLeads or Munafa work out my wholesale margin?
No. CarryLeads finds and shortlists business prospects by what you describe and where, scores them for fit, and prepares an editable opener; it does not price anything and it never sends outreach for you. Munafa measures true profit on a connected Shopify store from your own configured costs, which covers the orders that flow through that store rather than an offline wholesale quote. The arithmetic on this page is yours to run.