Calculating your retail price can be complex. There are many different strategies for finding the ideal price for your new product. Factors like production and business costs, consumer trends, as well as your profit goals, must be considered. It may also be necessary to factor in your competitors’ pricing strategy, or to consider your particular product’s value perception within your marketplace. 

Of the different methods for calculating retail price, one that’s considered fairly simple and easy to use is known as absorption pricing. As long as your math is correct, using this method to calculate retail price is one of the best ways to generate a profit. 

  1. Calculate your cost price. This number includes the cost of labour, materials, tools, marketing, and overhead. It can be helpful to use an online cost price calculator like this one.
  2. Next, take your cost price, plus the amount of profit you want and need to make per item sold.  Added together, you now have your wholesale price.
  3. Multiply your wholesale price by 2 or 2.5 to find your recommended retail price.

Ultimately, setting a price for a new product isn’t just pure math, and not every pricing strategy will work for every kind of retail business.  You’ll need to do your homework and decide what works best for your products, marketing strategy, and target customers.