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Margins
Hi there, Sara Blakely from Spanx said your product should be able to sell for 5x what you make it for, however I’m doing direct to consumer, selling online, and my manufacturer told me they can get me 60% margins initially. Can you please share your perspective?
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2 Replies
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Hi,
what Sara is saying is kind of the industry standard for traditional retail.
The equations look like this:
FOB x 2.2 = Wholesale Price
Wholesale Price x 2.2 = Retail PriceTypically it is around 2.2-2.5. I use 2.2 in this example. FOB is the cost of making your product, excluding shipping.
Let’s say your FOB is $100 then the calculation looks like this
FOB = $100
Wholesale Price = $220 (100 x 2.2)
Retail Price = $484 (220 x 2.2)
As you see, the retail price is 5 times the cost of making it.So if you sell DTC, cutting the middleman out, and keeping the same retail price, you have a much higher margin.
We recommend you aim for at least a margin of 50%, so if you can get 60% that’s good.
Did that answer your questions?
//Klas
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This reply was modified 5 years, 4 months ago by Klas.
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This reply was modified 5 years, 4 months ago by
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Hugely helpful, thank you!