Wholesale Pricing and Discount Structure Guide

What a good one includes

• A transparent Cost of Goods Sold baseline that factors in raw materials, labor, and overhead to establish your absolute floor price.
• A clear Suggested Retail Price and Minimum Advertised Price policy to protect your brand value and prevent price wars among retailers.
• Clearly defined Minimum Order Quantities for both initial and reorders to ensure every shipment covers its own processing overhead.
• A tiered volume discount schedule that incentivizes larger commitments without cannibalizing your wholesale margin.
• Standardized payment terms and shipping policies, such as Net 30 or FOB shipping points, to regulate your cash flow.
• A structured sample and tester policy so sales reps and retailers can evaluate products without eroding your main stock profit.

Common mistakes to avoid

• Setting your wholesale price by simply halving your retail price without calculating your actual production and operational margins.
• Forgetting to account for distributor margins, which are often much higher than standard retail margins and can completely wipe out your profits if not budgeted.
• Setting Minimum Order Quantities too low, resulting in high shipping and packaging labor costs that eat up the small wholesale profit margin.
• Neglecting to write a clear Minimum Advertised Price agreement, allowing wholesale buyers to undercut your own direct-to-consumer store online.

Frequently asked questions