How to price products for your online store: a hands-on pricing course

To price products for your online store, add up everything one sale costs you, then divide by what is left of the price after fees and your target margin. Start from your own costs and the margin you need, not from a competitor's price.

This hands-on course has seven lessons, each with a goal, steps, a common mistake and a practice task, plus a one-hour assignment that gives you a price sheet.

Lesson 1: What does a price have to cover?

Goal: list every cost one sale carries, so no cost hides inside your margin.

A price has to cover far more than the supplier invoice. You need: supplier invoices, a payment provider statement, packaging costs and, on a marketplace, its current fee schedule.

Six terms keep the course clear:

• Cost of goods is what you paid to obtain or make one unit, including inbound shipping and duties if any.
• Gross margin is the selling price minus cost of goods, as a share of the price.
• Markup is the amount added to cost, as a share of cost.
• Contribution margin is what is left after every cost caused by that order.
• Break-even price is the price where contribution margin is exactly zero.
• Floor price is the lowest price you accept for a channel or campaign, set above break-even.

Steps: write down cost of goods, then packaging and handling, the payment fee, marketplace commission if any, a returns allowance, advertising cost per order and the tax treatment (Lesson 4).

Common mistake: pricing from the supplier invoice alone. It is only the first layer.

Practice: write all seven items next to one product, and mark unknown numbers to find later.

Lesson 2: What is the difference between markup and margin?

Goal: move between markup and margin without error.

Markup uses cost as its base. Margin uses the selling price as its base. Confusing them is the most common pricing mistake, and it always errs the same way: you earn less than you believed.

The conversion is pure arithmetic. A markup of 100% doubles the cost, so half of the price is profit: a margin of 50%. A markup of 25% on a cost of 100 gives a price of 125, and the profit of 25 is 20% of the price: a margin of 20%. In short, margin equals markup divided by one plus markup.

This course uses margin on price, because fees and discounts are also shares of the price.

Common mistake: adding 30% to cost and calling it a 30% margin. It is a margin of about 23%.

Practice: convert a 40% margin target into the markup it needs.

Lesson 3: What is the formula for a selling price?

Goal: calculate a price that delivers your target margin after fees.

The core formula is:

price = (cost + fixed per-order costs) ÷ (1 − variable fee share − target margin share)

• Cost is the cost of goods for one unit.
• Fixed per-order costs do not change with the price, such as packaging or a flat fee.
• Variable fee share is every cost that is a percentage of the price, as a decimal.
• Target margin share is the share of the price you want to keep, as a decimal.

Worked example (illustrative arithmetic, not a real price or rate): cost 100, variable fees 10%, target margin 20%. The denominator is 1 − 0.10 − 0.20 = 0.70, so the price is 100 ÷ 0.70 = 142.86. Check: fees are 14.29, margin is 28.57, and 100 + 14.29 + 28.57 equals 142.86.

Add fixed per-order costs of 10 for packaging and labels: (100 + 10) ÷ 0.70 = 157.14.

Common mistake: adding fees afterwards, for example multiplying by 1.10. A fee is a share of the final price, so it belongs in the denominator.

Practice: calculate the price for your chosen product.

Lesson 4: How do tax and displayed prices affect my price?

Goal: know whether the price you calculate is the number shoppers see.

Prices can be displayed tax-inclusive, where tax is already inside the number, or tax-exclusive, where tax is added at checkout. In many markets consumer prices are tax-inclusive, while business buyers often see tax-exclusive prices. Which applies depends on the country and customer type.

Tax collected on a sale generally is not your revenue. Run the formula on the net price you keep before tax, then add tax if your market shows tax-inclusive prices.

Common mistake: applying the target margin to a tax-inclusive number, so the margin is partly calculated on money that belongs to the tax authority.

Practice: note, per country, whether customers should see tax-inclusive prices, and confirm with your accountant.

Lesson 5: How should I price across channels?

Goal: a separate floor price for your own store and each marketplace.

Pricing per channel means calculating the price separately for every place you sell, because costs differ. A marketplace usually charges a commission, while your own store has payment fees and your own marketing. The same product therefore has a different floor price on each channel.

Steps: make one column per channel, enter its variable fee share and fixed fees, run the formula at your target margin and again at your minimum margin to get the floor, then set each public price at or above its floor.

Keeping prices close across channels is a fair choice, but make it deliberately: if a channel costs more, either its price rises or the margin falls.

Common mistake: matching a competitor's marketplace price without checking your own fees. You may be selling at break-even or below it.

See our guides to marketplace stock sync and multichannel ecommerce software.

Practice: add a second channel column to your sheet and compare the two floor prices.

Lesson 6: What price tactics are worth testing?

Goal: choose a few pricing structures to test, without relying on promises.

Price architecture is how prices are arranged and presented. These tactics can help, but effects vary by product, market and audience, so treat each as a test.

• Rounding and charm prices: ending a price in a familiar number.
• Anchoring: showing a higher-priced option next to your main one.
• Bundles: items sold together, if the bundle clears the floor.
• Good-better-best: three versions at three price points.
• Free-shipping threshold: a basket value above which shipping is free, set from your real shipping costs. See the shipping guide.

Recalculate the margin after any tactic. A bundle or a rounded price changes the final number.

To test changes properly, follow our conversion rate optimization course. Clear pages also support a price: see product page essentials.

Practice: pick one tactic and decide what you would measure.

Lesson 7: How do I discount without losing my margin?

Goal: know the maximum discount before you announce a campaign.

A discount comes out of the margin, so set a discount budget and check the floor before every campaign. The maximum discount is the largest reduction that keeps the price at or above the floor:

maximum discount = 1 − floor price ÷ current price

Worked example (illustrative arithmetic, not a real price or rate): the current price is 157.14, costs are 110 and variable fees are 10%. With a minimum margin of 10%, the floor is 110 ÷ (1 − 0.10 − 0.10) = 137.50. The maximum discount is 1 − 137.50 ÷ 157.14, about 12.5%. A 20% discount would drop the order below the floor.

A sitewide discount applies to everyone and reduces margin on every product. A single-use coupon code goes to a chosen group, can be limited and tracked, and protects the price for everyone else.

Plan peak periods early with our peak season campaign guide.

Common mistake: discounting the products with the thinnest margin because they sell fastest.

Practice: calculate the maximum discount for one product.

When should I raise or review my prices?

Review prices on a fixed routine and whenever a cost changes. A monthly review is reasonable for a small shop.

Raise prices when supplier costs, fees, returns or advertising per order go up.

Each month, update costs from the latest invoices, recalculate every price, check thin-margin bestsellers first and review returns (see how to reduce ecommerce returns).

Check competitor prices ethically, using only public prices, as context and not as an order. Test price changes one product at a time.

Hypothetical example: a small candle shop builds a price sheet

This is a hypothetical example with no real figures. A small shop makes hand-poured soy candles and sells on its own store and one marketplace. The owner has always added "about a third" to the cost of materials.

The owner builds a price sheet for three products: a small candle, a large candle and a gift set.

1. List costs. Materials, vessel, box and time for each product. The gift set also gets ribbon and card.
2. Choose the base. The owner switches from markup on cost to margin on price.
3. Add two channel columns. The own store has the payment fee and advertising allowance. The marketplace has its commission and required packaging.
4. Calculate target and floor per cell, once at the target margin and once at the minimum.
5. Decide. The small candle is thin on the marketplace, so its marketplace price rises slightly. The large candle works on both channels. The gift set gets a price that includes ribbon and card, never counted before.
6. Set a discount rule. No campaign starts until each product's maximum discount is on the sheet.

The result is a sheet where every price has a reason and every change can be checked.

Final assignment and checklist

Set aside one hour and build your price sheet in a spreadsheet.

Assignment: make a row for your five best-selling products, fill in every cost from real invoices, calculate target and floor price per channel, compare with current prices, mark rows below the floor and fix the two largest gaps first.

The most frequent mistakes are:

• Confusing markup and margin.
• Forgetting fees, returns or advertising in the cost.
• Using one price on every channel without checking each floor.
• Running discounts without a floor check.
• Never reviewing, so old prices carry new costs.

Pricing with Shopiyz

Shopiyz is a hosted ecommerce platform that applies the price rules you define. The cost and margin decisions stay with you, and this price sheet is how you make them. Once the numbers are decided, Shopiyz helps with:

• Per-channel price rules with automatic price updates during campaigns.
• Multiple currencies with automatic currency and tax calculation in 150+ countries. See global ecommerce.
• Automatic discount rules and single-use coupon codes, plus campaign and promotion management.
• Central order management and multichannel analytics across 42+ marketplaces. See marketplace integrations.
• AI product descriptions that explain the value behind your price. Explore Shopiyz AI commerce and our guide to AI in ecommerce.

Shopiyz has a free plan and charges no commission on sales. See the plans or talk to us.