How do I price a physical product?

Work out the true landed cost first. The item itself, freight to you, any duties, and the packaging it ships in. Then add the variable costs of selling one: payment processing at your actual effective rate, outbound shipping if you absorb it, and a provision for returns based on a realistic rate rather than an optimistic one. That total is your real cost per unit, and it is commonly a third higher than the invoice from the supplier.

Then check the price supports wholesale before setting it, because retrofitting that margin later is not possible. The conventional structure is that wholesale sits at roughly half of retail, which means your retail price needs to be around four times your landed cost for the wholesale price to still work at double. Businesses that price at twice cost discover that selling through shops is impossible without raising prices on existing customers.

Decide whether wholesale is part of the plan before deciding you do not need that margin. Many product businesses that intended to sell only direct end up approached by a retailer, and the ones that priced for it can accept while the ones that did not have to decline or lose money. Building the headroom in costs nothing if you never use it.

Test the price against what the market will pay rather than only against cost, because cost plus pricing tells you the floor and not the number. Look at what comparable products sell for, and be honest about where yours sits in that range. A product priced below its category invites the question of what is missing, particularly from a business nobody has heard of.

Account for the cost of holding stock, which is the part that never appears in a unit calculation. Cash converted into inventory is cash unavailable for anything else, and slow moving stock also occupies space and may need discounting eventually. A product with strong margin that sells twice a year can be worse for the business than one with thinner margin that turns monthly.

Set the shipping decision as part of the price rather than separately. Free shipping increases conversion measurably and it is not free, which means either the price absorbs it or the margin does. Deciding which, deliberately, is better than adding a shipping charge at checkout and losing the sale that had already been made.

Model it at volume before committing, because some costs improve and others do not. Unit cost usually falls with larger orders while storage, handling, and returns scale with the number sold. A margin that works at ten units a month may look different at two hundred, in either direction.

Then review it when anything upstream changes. Supplier prices, freight rates, and payment processing all move, and a price set eighteen months ago against costs that have risen is a price quietly earning less than you think. Checking the calculation twice a year is what prevents discovering the erosion through an annual account rather than through a decision.

Decide the minimum order value alongside the price, because the fixed costs of processing and shipping make very small orders unprofitable regardless of margin. A threshold that encourages a second item is better for both parties than a policy of accepting any order and losing money on the smallest ones.

Check the effective margin against actual sales rather than the modelled one after a quarter, since returns, damage, and discounting all appear in reality and none of them appear in the calculation.