When you're setting up products in your store, our system allows you to include options like Retail Price, Base Price, and COGS — but which one is which? We're going to walk you through each option, and by the end of this article, you'll be a pricing champ!
This is an optional field for you to enter your product's Manufacturer Suggested Retail Price, or MSRP. This is the "sticker" price of your item.
If the Base Price is lower than the Retail Price, then the product's page will show a flag with a discount calculation. This is a great way to show that you are giving customers a discount on an item.
As the name suggests, this price is the base amount charged for the product before any price additions or up-charges are added. It is a mandatory field and is the price the customer will first see. If pricing needs to be hidden on the entire store you should set up a Purchase Order Store, or if select products need to have hidden pricing then you can add Purchase Order Products to a Store.
See the Building Fees in the Base Price section below for more information about how to include the cost of fees in the price of products and to download a pricing calculator.
COGS (Cost of Goods Sold):
This is an optional field for you to enter the amount you pay for the product. If you provide this information, then you can use our Margin Report in our Reports section to track your profit margin. You can input the COGS after the store closes to get a better estimation of your costs vs. profits.
You can easily add upcharges and fundraising to any product via Price Additions.
Click here to see the Fundraising & Price Additions article for more details.
Building Fees into the Base Price of Products:
Building costs into the price of products is a very common practice in retail. For example, retailers often account for the fact some items will be returned and build the cost of processing returns into the price of products. This means all consumers pay slightly higher prices to cover those costs so it doesn’t impact the retailer’s bottom line. This same strategy can easily be applied to your business, too!
Let’s say you want to pass the OMG fee and Stripe credit card processing fee to consumers. This can be done by adding a custom fee at checkout or by building the costs into the price of the products.
There are three steps to build these costs into the price of a product.
Step 1: Determine Variable Costs
Calculate the variable cost of producing the final product based on variables such as the price you pay for the blank product + decoration + any other variable costs.
Step 2: Add in Profit Margin
Add in your desired profit margin. This is an important step to make sure that the price of the product doesn’t just cover the costs of producing the item, but also makes you money. Here’s the equation for calculating the target price:
Target price = Variable Cost / (1 - profit margin as a decimal)
Make sure to consider fixed costs, price sensitivity of your customers, and market prices when deciding on your desired profit margin. You can also apply a markup to products instead of a profit margin.
Step 3: Add in Fees
Finally, build in the costs of selling the product on the online store. Here’s the equation for calculating the final selling price:
X - Z (X) - B - C (X) = Y
- X - The variable we’re solving for. It represents the final price that consumers will be charged to account for transaction fees
- Z - The percentage portion of the Stripe credit card processing fee written as a decimal. So, 2.9% = 0.029.
- B - The fixed portion of the Stripe credit card processing fee written as a decimal. So, 30 cents = 0.3
- C - The OMG fee written as a decimal. So, 3.95% = 0.0395.
- Y - The price calculated in step 2 to cover variable costs and profit.
Determining the price of products can be difficult. That’s why we created a simple calculator to do the heavy lifting for you! Download the Excel spreadsheet below. Enter your variable cost, desired profit margin, and OMG fee and the calculator will calculate the final selling price.