How to set a resale price in retail, with an example
In retail, the cost of goods is on the supplier's invoice, so the math seems simple: cost plus a percentage. The problem is that this percentage has to pay the rent, the staff, the card fee, the commission and the taxes and still leave a profit, and there are almost always dozens of products sharing the same structure.
See what goes into the cost of a resale item, how to allocate fixed costs across products and a complete example, calculated by the same math as the calculator.
Fictional example
A disposables distributor that sells to restaurants
Suggested price per case
R$72.94
With a 12% margin on the price. Below R$63.05, every sale loses money.
Calculate my priceWhat goes into the direct cost
A direct cost only exists because of each sale. In the calculator, choose “I sell products”.
Included
- The price of the goods on the supplier's invoice.
- Inbound freight, divided by the units in the order.
- Purchase taxes that do not generate a credit for your company, as your accountant advises.
- Delivery freight and packaging, when your company pays for them.
- Inventory losses from damage or expiry, as an addition to the cost of each unit.
Not included
- Store or warehouse rent, salaries, software and accountant: fixed costs.
- Card or marketplace fee: a percentage of the price, in the fees field.
- Salespeople's commission: a percentage of the price, in the commission field.
- Sales taxes: a percentage of the price, in the taxes field.
How to allocate fixed costs
The simplest way to allocate fixed costs across many products is by revenue: if a line accounts for a quarter of sales, it carries a quarter of the fixed costs. Divide that share by the units sold of the line and you have the fixed cost per unit.
Products that take up a lot of space or turn over slowly use more structure than their revenue shows. For them, it is worth adjusting the allocation upward.
Use the average volume of the last few months. If the business is strongly seasonal, also calculate with the volume of the weakest month, to know your floor.
Complete example: a disposables distributor that sells to restaurants
A fictional company, with numbers calculated by the same math as the calculator. The tax percentage is illustrative: for your company, use the effective rate your accountant gave you.
The distributor buys each case of cups for R$42.00, already including inbound freight, and spends R$4.00 on delivery freight and R$1.00 on packaging. The direct cost is R$47.00 per case.
Allocating by revenue, the cup line takes R$22,000.00 of the month's fixed costs. Divided by the 2,500 cases sold, that is R$8.80 per case, and the total cost reaches R$55.80.
The price bears 6% in taxes, 2.5% in card fees and 3% in sales commission. With a 12% margin, the suggested price is R$55.80 divided by 0.765: R$72.94 per case. The minimum price is R$63.05.
A 10% discount brings the price to R$65.65 and the real margin to 3.5%. To keep the same monthly profit, the distributor would need to sell 3,955 cases instead of 2,500.
Suggested price per case
R$72.94
- Direct cost per case
- R$47.00
- Allocated fixed cost
- R$8.80
- Total cost
- R$55.80
- Minimum price (zero margin)
- R$63.05
- Profit per case
- R$8.75
- Break-even point
- 1,254 cases per month
- Direct cost: 64.4%
- Allocated fixed cost: 12.1%
- Taxes: 6%
- Fees and commission: 5.5%
- Profit: 12%
Pricing pitfalls: retail and resale
- 1Every percentage point of card or marketplace fees comes out of the profit, and in resale the margin is usually thin.
- 2Compare the calculated price with the market price. If yours came out higher, the answer may be in purchasing, not in the selling price.
- 3Promotions and discounts come entirely out of the profit: check the minimum price before announcing them.
- 4Tax substitution and ICMS (state sales tax) change from product to product and from state to state: the effective rate comes from your accountant.
Run the numbers for your own company
Replace the example values with yours and see the suggested price, the minimum price, the break-even point and the effect of a discount. You can save the calculation as PDF and take it to your accountant. Free, no sign-up.
Frequently asked questions
How do I calculate the selling price of a resale product?
Add up the cost of the goods, the freight and the packaging, add each unit's share of fixed costs and divide by one minus the sum of taxes, fees, commission and margin. The calculator does this math and also shows the minimum price.
What is the difference between markup and margin in resale?
Markup is what you add on top of the cost; margin is what is left of the price. A 30% markup on cost does not leave 30% profit: the margin is smaller, because it is calculated on the selling price, which is higher than the cost.
How do I allocate fixed costs across many products?
By each line's revenue: the line that sells a third of the total carries a third of the fixed costs. Then divide by the quantity sold of the line. For bulky or slow-moving products, adjust upward.
Do I need to consider tax substitution?
If your products fall under tax substitution (a Brazilian regime in which the tax is collected earlier in the supply chain), it changes the purchase cost and the tax on the sale. The rules vary by product and by state, so ask your accountant for the cost of the goods with that effect already included and the effective rate on the sale.
Got the right price? Show it to the people who buy
In an online business round you talk, in short video meetings, with companies that have said they are looking for what you offer. Your company's first round is on us, with just the CNPJ (Brazilian company tax ID).