Fashion Wholesale Pricing Rules
If you’re looking at wholesaling your fashion brand you will have no doubt been told to follow mark-up (MU) 2 -3.
So what does that actually mean? And will you make a profit if you follow this ‘rule’?
The first thing to note is there is no one rule that fits all, as everyone has different costs involved in their business. Therefore I strongly recommend that you invest your time accurately working out how to calculate yours.
Continue reading to learn how you should price your wholesale range.
Rule 1 - How does wholesale pricing actually work?
Wholesale (W/S) pricing is calculated by deducting a wholesale discount off your recommended retail price (RRP).
Platforms like ASOS, Nordstrom or Zalando negotiate their W/S pricing for every brand they work with, again as there is no one rule that fits all.
Factors that can affect your W/S pricing fall within your commercial deal that you will negotiate. For example:
- FOB or landed delivery terms
- Wholesale or marketplace operating terms
- Your desirability as a brand (how much do they want you!)
Finally, to note every platform has different benchmarks that they follow, therefore again there is no one guide that fits all! (more on that later…)
Rule 2 - What is your starting point?
Conduct a competitor analysis looking at the RRP of your competitors that are present on the fashion wholesale platforms that you want to be present on.
To successfully analyse their pricing, you need to look at it by category, looking at their entry and exit price points by the currency that you will be selling in. For example:
- If you’re selling to ASOS conduct the pricing analysis in GBP
- If you’re selling to Zalando conduct the pricing analysis in EUR
- If you’re selling to Nordstrom conduct the pricing analysis in USD
Once you’ve gathered this data, you now need to ensure that your RRP sits within the entry and exit price point to ensure that you are competitive, therefore desirable.
If not amend accordingly, but be cautious not to lower too many price points without checking your buying in margin (BIMU).
Rule 3 - Reep the rewards of doing wholesale
A huge benefit of working in fashion wholesale is the volume (large unit orders), as it can benefit you in 2 major ways:
- Lower product unit cost price with your manufacturer
- Higher bargaining power with your logistic providers
So get ahead of the game, before you have even secured a wholesale deal and request better cost price quotes based on your intention of gaining higher total order units.
By gaining lower cost prices, this could mean that you’re able to lower your RRP, therefore be more appealing with a wholesale platform.
I recommend that you request quotes for 100 units, 500 units and 1,00 units and use wholesale as your bargaining power.
"Wholesale (W/S) pricing is calculated by deducting a wholesale discount off your recommended retail price (RRP)."
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Rule 4 - How to balance being competitive with being profitable
Checking that you’re profitable is essential for any type of business you conduct, but especially in fashion wholesale. So let me teach you how …
In the same table (competitive pricing):
- Enter your cost price per unit (not forgetting the above point)
- Enter your freight costs and any duty or taxes, per unit (not forgetting the above point)
- Now calculate the BIMU in excel using this sum =1-landed cost price/RRP
As a rough rule of thumb, you need to be hitting BIMU of 70% to be profitable in wholesale.
Let’s run through 2 scenarios:
1. You have a fashion item that is the key piece of your collection but only makes BIMU 66%. Do you increase the RRP to make more profit or leave it as is?
2. You have a best-seller that drives lots of volume for you that makes only 60% BIMU, but you know it’s the price point that drives the volume. Should you increase the RRP for wholesale?
These are commercial decisions you need to decide.
Overall try to ensure your total wholesale collection BIMU exceeds 70%, therefore some styles could be 65% and some 75% BIMU, as long as the overall collection equals 70%+ meaning you should be both profitable and competitive.
Rule 5 - Up-pricing fashion wholesale rules
Now you know that you are both profitable and competitive, let me tell you about some rough up-pricing rules.
As an approximate;
- AUD brands going into the UK/EU can up-price their RRP by +12%
- AUD brands going into the USA can up-price their RRP by +20-25%
Why because all of these countries have costs associated with them, and you’re not alone in increasing your RRP to absorb some of these costs.
Read this post for more specific info on launching into new markets.
So play around with these up-pricing % in the same fashion wholesale pricing table, and see if you can afford to up-price your RRP whilst remaining competitive.
Rule 6 - Wholesale profit expectations
Wholesale profit won’t blow your socks off, especially if you don’t follow this guidance.
To be profitable you need an in-demand product that has been priced accordingly to the market, consumer and your bottom line.
My final piece of advice is about what commercial terms you can expect from fashion wholesale. Wholesale deals vary from 65% – 75% off RRP. Therefore if you achieve less than 70% BIMU, i.e. are paying more than 30% retail value for your product and agree to a wholesale deal where you are only paid 25% of the retail value – you will be making a loss.
Choose to price accurately now, to secure your fashion brands profitability.
Congrats! You will now have your fashion wholesale pricing rules
To summarise in fashion wholesale via eCommerce channels, you don’t quote your W/S price, just your RRP. So therefore you need to ensure that your RRP is high enough to absorb operating costs whilst remaining competitive.
