Frequently Asked Questions
Is list price and retail price the same thing?
In ecommerce, the list price and retail price have notable differences. A list price — also known as the manufacturer suggested retail price (MSRP) — is exactly that: a suggestion from the manufacturer to the retailer about the price to sell a product. Retail pricing, on the other hand, describes the final price of a product the customer purchases. While some stores always sell at (or below) the SRP, others may only markdown during a clearance or closeout sale.
How do you calculate retail price?
Setting retail prices begins with the knowledge that that’s exactly what the customer will pay, which can largely impact an item’s desirability. A number of retailers benchmark their pricing decisions using keystone pricing, which means doubling the cost of a product to achieve a better profit margin. And yet, in many cases, shop owners may want to markup to a higher price (or drop to a lower price), depending on consumer demand and the availability of raw materials.
One quick option for calculating retail price is the formula: retail price = [cost of item ÷ (100 - markup percentage)] x 100. Although this is a convenient pricing method, keep in mind this particular pricing strategy may not guarantee profitability for every product or business.
What should the retail price include?
When it comes to how to price your products, you’ll need to factor in variable costs (per product), add in a profit margin, and loop in fixed costs, as well. These three components will have a big impact on how well your goods are priced, and how well customers respond. In addition, if you also sell in a brick-and-mortar retail store, you’ll likely want to include the rent fees, advertising expenses, and the cost for supplies like computers or cash registers.