Getting your wholesale pricing right

The traditional wholesale pricing formula is simple: wholesale price = retail price ÷ 2 ("keystone markup"). This gives retailers a 50% margin and, assuming your COGS is ~30-40% of wholesale, gives you a healthy brand margin too.

But the keystone rule is a starting point, not a law. Here's when to adjust:

• Luxury brands may wholesale below half of retail, for example at 40-45% of retail (giving retailers a 55-60% margin), when the brand's cachet justifies it
• Value brands may need to wholesale at 55-60% of retail if retailer margins are thin
• DTC-native brands entering wholesale need to recalculate — your retail price may need to increase to support wholesale margins

Before setting wholesale prices, know your costs:

• Cost of Goods Sold (COGS) — materials, labor, manufacturing, packaging
• Landed cost — COGS + duties, freight, warehousing
• Overhead allocation — design, sampling, sales, marketing per unit

Rule-of-thumb margin targets to plan against:

• Brand gross margin (wholesale price − COGS): 55-65%
• Brand net margin (after overhead): 15-25%
• Retailer gross margin: 50-60%

If your margins fall below these thresholds, either your pricing is too low or your costs are too high. Don't try to make it up on volume — that rarely works in fashion.

Not all buyers are equal, and your pricing can reflect that:

• Tier 1 (Key accounts) — Major department stores, flagships. May receive 5-10% better pricing for large volume commitments.
• Tier 2 (Growing accounts) — Multi-door independents, strong online retailers. Standard wholesale pricing.
• Tier 3 (New accounts) — New boutiques, first-time buyers. Standard pricing with possibly higher minimums.

Tier pricing should be based on annual volume commitments, not one-time orders. In ModaFlow you can add a line or order discount when you review an order, so a key account's better terms reach its invoice.

Minimum order quantities (MOQs) protect your profitability:

• Per-style minimum — e.g., 6 units per style (ensures production efficiency)
• Per-order minimum — e.g., $500 or $1,000 wholesale (ensures orders are worth processing)
• Opening order minimum — Higher minimum for first orders (e.g., $2,000) to filter serious buyers
• Reorder minimum — Lower minimum for repeat orders (e.g., $300) to encourage replenishment