How to Price Handmade Goods for Wholesale: A Complete Guide for Craft Sellers

How to price handmade goods for wholesale: Use this straightforward guide to ensure your craft pricing is profitable, sustainable, and attractive to wholesale buyers.

Setting profitable craft prices can be a real challenge - doubly so when you're pricing for wholesale sales.

Shop owners who buy your products on a wholesale basis typically expect to pay about half of the retail price of your product.

In practical terms, if you sell bars of handmade soap for $10 at craft fairs, wholesale buyers will expect to pay about half that amount. To grow your business through wholesale arrangements, you'll need to ensure you can still make a profit when selling your products for $5.

You'll need to understand your costs and build efficiency into your business wherever possible.

This guide will walk you through a simple pricing formula and show practical examples. You'll also find helpful tools to understand your costs and confidently price your products for retail partners.

Wholesale Pricing Basics

Before we dive into calculating prices, let's look at some key concepts like markup, margin, and cost of goods sold (COGS) and why they matter to your bottom line.

What's the Difference Between Wholesale and Retail Pricing?

Wholesale Price: The discounted price you sell to retailers so they can resell at a profit.

Wholesale buyers expect lower prices in exchange for buying your products in larger quantities.

Selling many items to one customer is cheaper. It is also more efficient than selling the same number of items to many customers. Those efficiencies are what allow you to sell at a lower price to your retail partners.

Retail Price: The final price customers pay when buying directly from a retailer or maker.

This is the price you'd charge if you sold your product at a craft show or on your Etsy shop. It's also the price your wholesale customer would charge when selling the same product in their shop.

Example: If you sell a handmade candle for $20 at a craft market, your wholesale price might be $10 per candle to a boutique owner.

Why Wholesale Pricing Must Cover Volume, Margin, and Profit

To successfully scale your craft business with wholesale accounts, you need to remember: wholesale isn't about selling for less. Wholesale is about selling smarter and more efficiently.

Volume

Retailers purchase large amounts of your product in one order. You earn a smaller profit per item, but you make that up in the efficiencies that come with selling at a larger volume.

You must determine a minimum order amount for wholesale customers. Minimum purchase amounts are standard in wholesale arrangements, and without them it will be extremely tough to build a sustainable, profitable business.

Not sure what your minimum purchase amount should be? Start by visiting the websites of companies that sell similar handmade products. Many list their wholesale terms online, which can give you a solid starting point. While you're there, take note of any other policies they have for wholesale buyers.

Margin

Margin is the percentage of your selling price that remains after covering the cost of goods sold. It represents your actual profit on each item and is a key indicator of how efficiently your business generates earnings.

You must ensure that even at a lower price, your margins are healthy enough to sustain and grow your business. 

A wholesale to retail pricing formula will help you see where all of your expenses are coming from, whether you can profitably sell at wholesale prices, and where there's room for more efficiency and cost savings. All of that information can help you boost profit margins.

Profit

Wholesale sales must allow you to grow, not just break even.

If you're successful in establishing wholesale customers, you'll be very busy creating a lot of product to fulfill those orders. If you haven't built profit into that pricing, you'll work hard but see little reward.

Don't sacrifice your business sustainability for wholesale exposure.

Key Costs to Include in Your Wholesale Pricing

Cost of Goods Sold (COGS)

Cost of Goods Sold (COGS) is the total cost to create one handmade item. It can include the price of your materials, packaging, labor, and overhead.

Cost of goods sold does not include any selling fees, and it does not include profit.

Markup 

Markup is how much you increase the cost of making your product (COGS) to add profit into your selling price.

Example: Handmade Necklace Wholesale Price

If you want to sell handmade necklaces to wholesale customers:

Assume it takes 30 minutes to make each necklace, and you allow $20 per hour for labor. Each necklace uses $5 worth of raw materials, and you allow 10% of materials plus labor for overhead.

Here's how your numbers add up:

Retail price is typically 2 times wholesale. In the example above, the retailer would likely charge customers $66 for the necklace.

Wholesale Pricing Formula for Handmade Goods

Here's a wholesale pricing formula that's popular among craft sellers.

The Formula:

Cost of Goods Sold (COGS) = Materials + Labor + Overhead

Wholesale Price = COGS × 2

Retail Price = Wholesale Price × 2

Alternative Pricing Models to Consider

While the formula above is a great starting point, it's not the only way to price handmade products. Here are two other pricing approaches you can try is the wholesale pricing formula isn't working for you.

Keystone Pricing: This is a traditional retail method where the wholesale price is simply half the retail price. It assumes that retailers will double their costs to set the retail price. Your profit depends on how low you can keep COGS while still hitting that keystone margin.

Perceived Value Pricing: Instead of basing price on costs alone, this strategy looks at how much your product is worth to the customer. If your handmade item is highly unique, solves a specific problem, or appeals emotionally, you might price it higher, regardless of your costs, as long as the market supports it.

Each approach has its strengths. Consider your brand, market position, and production efficiency when choosing your ideal strategy. Some sellers even blend these methods!

Next, let's see the wholesale pricing formula in action with a few case studies.

Case Study #1: Pricing Handmade Soap

Background:

Emma runs a small handmade soap business. She currently sells them retail online and at craft shows. She eventually wants to sell her soaps to local boutiques at wholesale.

She needs to price her soaps properly to ensure she covers her costs and makes a profit.

Step 2: Calculate Wholesale Price

Wholesale Price = COGS × 2

Wholesale Price = $3.45 × 2 = $6.90

Step 3: Calculate Retail Price

Retail Price = Wholesale Price × 2

Retail Price = $6.90 × 2 = $13.80

If Emma sells each soap at $6.90 wholesale and $13.80 retail, she'll cover all costs and build healthy profit margins into both sides of her business!

For simplicity, she could consider rounding up prices to $7 wholesale and $14 retail.

Now, let's apply the same pricing approach to a different craft business example.

Case Study #2: Pricing Handmade Jewelry

Background:

Sophia designs delicate handmade necklaces using semi-precious stones and sterling silver chains. She wants to start offering her jewelry to boutiques at wholesale prices and also sell directly to customers at retail prices through her online store.

Step 2: Calculate Wholesale Price

Wholesale Price = COGS × 2

Wholesale Price = $23.00 × 2 = $46.00

Step 3: Calculate Retail Price

Retail Price = Wholesale Price × 2

Retail Price = $46.00 × 2 = $92.00

Sophia should price each handmade necklace at $46.00 wholesale and $92.00 retail.

Avoid Common Wholesale Pricing Mistakes

Here are some common wholesale craft pricing mistakes and how to avoid them, so you get your prices right.

1) Forgetting to Include Overhead Costs

Mistake: Only counting material costs and ignoring expenses like studio rent, utilities, tools, website hosting fees, or packaging.

Why It Hurts: Your COGS will be too low, and your prices may not cover your full business costs.

Overhead may not be a big concern if you're running a smaller business. If you're scaling up with wholesale orders, those costs can add up.

How to Avoid It:

• Always add a share of your monthly overhead to each product.
• 10-15% of labor plus materals works well in many cases.

2) Underpricing Labor

Mistake: Not paying yourself for the time spent creating, assembling, or finishing your handmade products.

Why It Hurts: You end up working for free, and you can't sustainably grow a business if you aren't fairly compensated.

How to Avoid It:

• Pay yourself an hourly wage that reflects your skill level, even if you start modestly.
• Some labor-intensive items become quite expensive when the wholesale pricing formula is applied. You may want to consider other craft pricing formulas and business models if this one is not a good fit.

3) Using Emotional Pricing Instead of Strategic Pricing

Mistake: Under-pricing based on a gut feeling that people won't be willing to pay a higher price for your products.

Why It Hurts:

• Leads to underpricing, burnout, and financial loss.
• Devalues your work in the eyes of wholesale buyers.
• Devalues all handmade products and shoppers compare your too-low prices with other sellers' more appropriate prices.

How to Avoid It:

Base your prices on solid numbers, and a pricing strategy that fits your business goals.

If you need to adjust prices, do so strategically. Look for way to reduce costs and make your business more efficient, don't just drop prices without a plan to recoup the profits somewhere else.

Free Pricing Tools and Resources

Wholesale Pricing Worksheet

Download this free wholesale to retail pricing worksheet, and start calculating profitable prices for your handmade items.

Wholesale Pricing Calculator

If you prefer to work online, check out this online wholesale pricing calculator!

FAQ: How to Price Handmade Goods for Wholesale