How to set price and calculate profit margin for online reselling business

Last updated 12 Oct 2020 . 1 min read

The price you charge for your product is one of the most important decisions you can make for your business. If you set the price too high or too low, either of them can limit your business growth.

When you are setting the prices, you make sure that the price and sales both are according to the amount of profit you want to make.

The basic rules of pricing a product are quite simple:

The price of the product should include all costs and profits.
The best way to lower your price is by reducing your overall cost.
You should keep a check on the prices to make sure that they reflect the overall cost, market demand, supply and profit.
Pricing must be done to make sure sales are happening.

One simple way of determining what should be the right cost is to first include everything you need to pay for - loan repayments, utilities, marketing costs, shipping charges and other expenses like another phone only for your business, internet charges, etc involved in operating your business.

What is the margin?

Margin is the profit that you earn with SHECO. It is the amount of money you add on top of the price of the product at which the customer buys from SHECO. For example, The price of a product on SHECO is Rs 300 and you want to sell the product at a higher price than that listed on SHECO, so you plan to sell it at Rs 400. Here, your margin will be Rs 100.

How to add a margin?

Choose a catalogue
Click on the product you want to sell
Select add to cart
Choose size and quantity, and then click on done
Go to Cart
Choose a payment method
Enter your customer’s pin code to include the shipping charges, and then click on the checkout
Now you will see the total price that is product charges plus shipping charges
Add customer’s address and proceed further
Select the existing details or add a new one if you want to
Click on Proceed
Here you have to enter the final amount that you want your customer to pay. This final amount is the product charges + shipping charges + your margin

How much profit margin can you add?

This amount is not fixed and you can add on the basis of what you think is appropriate. Mostly, on a reselling platform like SHECO, the percentage of margin is 20% to 60% depending upon what type of product you are selling. You should always add Margin to your actual price to make some profit with every product that gets sold out.

What margin you put is your income and therefore it's important to choose wisely. You should put the margin depending upon the prices of other similar products on SHECO so that it is not too high or not too low.

Profit margin is the final number that is going to affect all other numbers in your business. If you apply a constant profit margin to the pricing, this will help you make the profits you need to make and draw ongoing plans to make gross profits for your business.

Take the following example for understanding net profit better:

	Product Item 1	Product Item 2
Your Selling Price	100	100
Item price on reselling website	40	65
Gross-profit margin	60	35
Extra expenses (logistics, internet charges, etc)	43	19
Net profit	17	16