Pricing 101: Pricing Consistency, MSRPs, and Markups

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Here are some time-saving and helpful pointers on pricing to ensure that your brand is getting the exposure, reputation, and traction you want!

Consistency – to maintain consistency for retailers interested in your brand, check to make sure your pricing on different platforms (whether it is on Modalyst or your own website) is the same across the same products.

The Suggested Retail Price (MSRP) you list on Modalyst is imported directly into the dropshipping sites retailers use (Shopify, Big Commerce, WooCommerce, etc) – thus , you always want to list the exact same item for the exact same MSRP. This will help to maintain the integrity of Modalyst, and more importantly, your brand!

Price on Modalyst:

step3.1

Price on Retailer site:

step 4

Price on Brand site:

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MSRP Breakdown – the MSRP is an industry wide standard metric that is defined as the “Manufacturer’s Suggested Retail Price.” It represents the amount of money for which the company that produces or manufactures an item recommends that it be sold in stores (retail channel).

MSRP does not necessarily correspond to the price retailers actually end up using or to the price customers are willing to pay, although more recently, MSRP has attempted to take into account market demand. MSRP prices combine the cost of production along with the administrative (marketing and sales) and distribution costs, and finally, intended profit. Given this information, check that your MSRP makes sense and works for your brand!


Mark-ups – to determine the ideal price point for your items or just understand how markups work in the retail industry, you can use this simple framework – called Keystone Pricing. This will help to ensure that your price is always right!

keystone

  1. Often, if your item is similar to items you have sold in the past, you can expect to price at the same level. If your item is not similar to anything you have sold in the past, use a competitor analysis or market dynamics to comparably price your item, altered for what makes your product unique. For example:comps
  2. Now that you know what the MSRP is and how it is derived, you can use backwards induction to determine the targeted retail price to your end consumers. Starting with the MSRP, you can use the industry standard retailer markup of 2x to calculate what your wholesale price should be. Modalyst actually recommends that you factor in about a 2.4x markup from the wholesale price.
  3. Based on the wholesale price that results from this backwards induction analysis, you can determine if your costs and ideal profit margin are being covered at that price. As another benchmark, you can check if the wholesale price that you are selling to retailers at is at least 2-3x above your manufacturing cost.

 

By Anesha Agarwal, Modalyst

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