How to Properly Price Products for Retail: A Practical Guide for Retailers

Pricing your products correctly is one of the most important decisions you make as a retailer. Get it right, and you maintain healthy margins, stay competitive, and build long-term customer loyalty. Get it wrong, and you risk lost sales, squeezed profits, or eroded brand value.

If you’re unsure where to start—or you’re looking to fine-tune your approach—this guide walks you through the key principles of retail pricing that actually work.

1. Know Your Costs Inside and Out

Before you can price anything, you need to know what it's costing you to bring that product to your shelves. This includes:

Wholesale cost
Shipping and import fees
Duties or taxes
Packaging (if applicable)
Staff time (handling, merchandising, customer service)

Add these together to get your landed cost per unit. This is your foundation. Every price decision starts here.

2. Determine Your Target Margin

Margins vary by industry, but most retailers aim for at least a keystone markup (doubling the wholesale cost). That translates to a 50% gross margin.

But not all products will (or should) follow the same formula. For example:

High-demand, low-competition items may justify a higher markup (60–70% margin)
Commoditized products may require lower margins to stay competitive
Impulse or add-on items often have strong markup potential with little pricing resistance

Define your ideal margin range and use it as your pricing guardrail.

3. Research the Market

Customers today are price-aware and comparison-savvy. Research what similar products are selling for, both in-store and online. Ask:

What’s the average price point for this type of product?
Are there luxury or discount versions of it?
Where does your product sit in that landscape?

Your price should reflect your positioning—but it still needs to make sense within the broader market context.

4. Factor in Perceived Value

Perceived value is what customers believe a product is worth, and it’s not always based on cost. It’s shaped by:

Packaging and presentation
Product story or origin
Brand reputation
Reviews or testimonials
In-store experience

If your product commands a higher perceived value, you can price higher—often significantly so. Don’t be afraid to test this if the quality and branding support it.

5. Don’t Forget Psychological Pricing

Retail is as much psychology as it is math. Consider using:

Charm pricing (e.g. $19.99 instead of $20.00)
Tiered options (good/better/best pricing structures)
Bundle pricing (3 for $25 instead of $9.99 each)

These techniques can drive higher average order values and improve perceived deals without hurting your margins.

6. Test, Track, Adjust

Pricing should never be “set it and forget it.” Watch what sells, what stalls, and what customers respond to. Track key indicators:

Sell-through rate
Profit margin per product
Returns or complaints
Customer feedback

Don’t be afraid to raise prices if demand is strong or lower them if inventory lingers. Seasonal adjustments, bundling, or promotional offers can also help fine-tune performance.

7. Keep Promotions Strategic

Sales and discounts can boost traffic and clear slow-moving stock—but they should be part of a larger strategy, not a permanent crutch. Be clear on:

How deep of a discount you can offer without erasing your margin
When it’s time to markdown versus phase out a product
How promotions affect perceived value long-term

Final Thoughts

There’s no one-size-fits-all formula for pricing retail products. But if you start with accurate cost data, aim for sustainable margins, and build pricing around your market and brand positioning, you’ll be ahead of the curve.

Take your time, test often, and remember: the right price isn’t just about making the sale—it’s about building a profitable, lasting business.