Navigating wholesale vs. direct-to-consumer (DTC) pricing is a delicate balance between profitability, competitiveness, and brand positioning. This guide breaks down how to price your products strategically, ensuring healthy margins while staying attractive to both retailers and consumers.

Step 1: Understanding Pricing Fundamentals

Markup vs. Margin

Many brands confuse markup and margin, but they represent different ways to calculate profitability.

Markup (%) = (Selling Price - Cost) ÷ Cost × 100
Margin (%) = (Selling Price - Cost) ÷ Selling Price × 100

How ERP Helps:
Calculates optimal pricing structures based on cost inputs.

Step 2: Calculating Your Costs Accurately

To set profitable prices, you must first determine the total cost per unit (COGS – Cost of Goods Sold).

Key Cost Factors to Consider:

• Materials & Trims – Fabric, buttons, zippers, labels

• Manufacturing – Cutting, sewing, finishing, and quality control

• Packaging & Shipping – Hangtags, boxes, poly bags, and shipping to warehouses

• Import Duties & Taxes – Tariffs and VAT, if applicable

• E-Commerce Fulfillment Fees (for DTC brands) – Shopify fees, payment processing, storage costs

How PLM Helps:
Stores cost breakdowns per product, making pricing calculations seamless.

Step 3: Setting Your Wholesale vs. Retail Prices

The standard wholesale vs. retail pricing formula follows an industry-wide markup structure:

Wholesale Price = Cost Price × 2 to 2.8 (or 50–65% margin)
Retail Price (MSRP) = Wholesale Price × 2 to 3 (or 60–75% margin)

Example:
Boutique Wholesale Pricing vs. Online Retail Pricing – Prices may vary, but should always protect your margin.

Step 4: Avoiding Common Pricing Mistakes

Many fashion brands struggle with underpricing or overpricing due to incorrect calculations or lack of market research.

1. Underpricing & Undervaluing Your Brand

Mistake: Setting wholesale prices too low, leading to unsustainable margins
Solution: Use industry-standard markups and negotiate higher price points with retailers

2. Not Factoring in Discounts & Returns

Mistake: Not considering markdown allowances, seasonal sales, or returned inventory
Solution: Build in a 10–15% markdown buffer in your pricing model

3. Ignoring Competitor Pricing

Mistake: Setting prices without benchmarking against similar brands
Solution: Research competitor pricing to stay competitive while maintaining brand value

Step 5: Adjusting Prices for Different Markets & Retailers

Brands selling internationally or across different retail environments need market-specific pricing strategies.

Factors to Consider:

• Import Duties & VAT – Prices may be higher in Europe vs. the US

• Retailer Requirements – Some stores demand specific pricing structures or exclusive discounts

• Online vs. Brick-and-Mortar Pricing – DTC pricing may differ from wholesale partners’ retail prices

Checklist: Setting Profitable Fashion Prices

• Calculate costs accurately – Include materials, labor, duties, and fulfillment fees

• Use the right markups – Apply 2.5x for wholesale, 2.5–3x for retail

• Consider discounts & returns – Build in a buffer for markdown allowances

• Research market rates – Benchmark pricing against competitor brands

• Adjust prices for different markets – Customize pricing for wholesale, DTC, and international sales

Final Thoughts: Mastering Pricing for Profitability

• Balance profit & market positioning – Price competitively while ensuring healthy margins

• Use PLM & ERP for data-driven pricing – Track costs, adjust pricing in real-time, and maintain consistency

• Regularly review pricing – Monitor performance and tweak pricing based on sales trends and retailer feedback

By understanding costs, industry markups, and retailer expectations, brands can set profitable prices that support both wholesale expansion and direct-to-consumer growth.