What Is a Wholesale Price?
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Talk to our experts- Wholesale price
- A wholesale price is the price a manufacturer, wholesaler or distributor charges another business for goods that business will resell or use in its own operations. It is a business-to-business price, separate from the retail price the end consumer pays, and in B2B it is often set per account through catalogs, price lists and negotiated terms.
How it works
A wholesale price is what a business buyer pays a manufacturer, wholesaler or distributor for goods it buys to resell or to use in its own operations.
The Bureau of Labor Statistics, describing the Wholesale Trade sector (NAICS 42), calls wholesaling an intermediate step in the distribution of merchandise. Wholesalers sell merchandise to other businesses, and the goods fall into three groups:
- Goods for resale: goods sold to other wholesalers or retailers.
- Capital goods: capital or durable nonconsumer goods.
- Production inputs: raw and intermediate materials and supplies used in production.
Each seller sets its own wholesale prices. The Federal Trade Commission's antitrust guidance says competitors at each level of the supply chain must set prices independently: manufacturers cannot agree on wholesale prices, and dealers cannot agree on retail prices. This is general information, not legal advice.
Wholesale price vs. retail price
- Wholesale price: paid by a business that buys the goods to resell them or use them.
- Retail price: paid by the end consumer, and set by the reseller. In the FTC's words, a dealer is free to set the retail price of the products it sells.
- MSRP: the retail price a manufacturer suggests. The reseller can sell at the MSRP or at a different price, as long as it decides on its own.
The gap between the wholesale price and the retail price is the reseller's gross profit on each unit.
Ways to set a wholesale price
- From cost: add a markup to the unit cost, as in cost-plus pricing: wholesale price = unit cost x (1 + markup).
- From retail: take a percentage off the retail price or MSRP.
- By quantity: lower the unit price as the order grows, as in tiered pricing.
- By account: agree a fixed price with a specific customer.
Example
A manufacturer makes a work light for $20.00 a unit.
- Wholesale price: a 100% markup on cost gives $20.00 x 2.00 = $40.00.
- MSRP: the manufacturer suggests a retail price of $80.00.
- Retailer's gross profit at MSRP: $80.00 - $40.00 = $40.00, half of the retail price.
- Volume account: a distributor buying 500 units gets 10% off wholesale: $40.00 x 0.90 = $36.00 a unit, or 500 x $36.00 = $18,000.00.
On Shopify
Shopify B2B runs on the Basic, Grow, Advanced and Shopify Plus plans. After you create a catalog, you can assign it to let B2B customers purchase the included products at the prices you set using catalogs.
- Adjustments: a catalog can raise or lower the product price by a percentage.
- Fixed prices: set prices for specific products. Fixed prices override any overall adjustment.
- Volume pricing: add up to 10 quantity breaks.
- Catalog limits: on the Basic, Grow and Advanced plans you can assign up to 3 active catalogs across all your B2B markets. On Shopify Plus you can create an unlimited number of catalogs and also assign them directly to specific company locations.
How Uncap helps
Uncap's guide to Shopify B2B pricing walks through how Shopify's three catalog pricing models work. When you raise retail prices by 5% across your catalog, every buyer on a percentage-based catalog automatically gets the updated wholesale price without any catalog edits; the tradeoff is that wholesale pricing is always derived from retail. For manufacturers and distributors running an ERP, the guide notes, pricing originates in the ERP, not in Shopify.
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Frequently asked questions
What is a wholesale price?
A wholesale price is the price a manufacturer, wholesaler or distributor charges another business for goods it will resell or use in its own operations. The retail price the end consumer pays is set separately by the reseller.
What percentage is a wholesale price?
It depends on the seller, because each seller sets its own prices. To express a wholesale price as a share of retail, divide it by the retail price: a $40.00 wholesale price on an $80.00 MSRP is $40.00 / $80.00 = 50% of MSRP.
What is the difference between wholesale price and retail price?
The wholesale price is what a business pays to buy goods for resale or for its own use. The retail price is what the end consumer pays the reseller. The difference between the two is the reseller's gross profit per unit.
How do you calculate wholesale price?
One way is to start from cost: wholesale price = unit cost x (1 + markup). A $20.00 unit cost with a 100% markup gives a $40.00 wholesale price. Sellers also set wholesale prices as a percentage off retail, by quantity or by account.
