Pricing is the most impactful decision you make for any product. Set it too high and you do not sell. Set it too low and you work for nothing. Here is how to get it right.
Calculate your required selling price with the Product Pricing Calculator.
Start with Your True Cost
Most sellers underestimate their costs. Your real cost includes:
- COGS (Cost of Goods Sold): what you pay for the product or materials
- Platform fees: referral fees, transaction fees (see Seller Fee Comparison)
- Payment processing: typically 2.9% + £0.30 even when not charged separately by the platform
- Shipping to customer: the cost to you, whether you offer free shipping or charge for it
- Returns provision: budget 3-8% of revenue for returns, replacements, and disputes
- Packaging: boxes, void fill, tape, labels, custom packaging
- Ad spend: cost per sale from any paid advertising
The Pricing Formula
Once you know your total costs, work backward from your target margin:
Selling Price = Total Costs / (1 - Target Margin)
Example: your total costs (COGS + shipping + platform fees) are £12, and you want 30% margin.
Selling Price = £12 / (1 - 0.30) = £12 / 0.70 = £17.14
Selling at £17.99 gives you slightly over 30% margin.
What Margin Should You Target?
| Situation | Target Margin |
|---|---|
| Volume commodity product | 15-20% minimum |
| Standard ecommerce product | 25-35% |
| Handmade or unique product | 40-60% |
| Digital product | 70%+ |
Margins below 20% leave almost no buffer for fee increases, returns, or competitive price drops. Most sustainable ecommerce businesses need 25-35%.
Competitive Pricing Considerations
Cost-plus pricing tells you the minimum viable price. Competitive pricing tells you whether the market will pay it.
Research the competition:
- Search your product on Amazon, eBay, or Etsy and note the price distribution
- Identify where the "Buy Box" or top listings are priced
- Assess what differentiates your product (better photos, bundle, warranty, branding)
If the market price is below your minimum viable price, the product may not be viable on that platform. Consider different platforms, suppliers, or product variants.
Platform-Specific Pricing Considerations
Amazon: Price needs to be competitive with the Buy Box. FBA sellers often have an advantage as Prime badge increases conversion, justifying slightly higher prices.
eBay: Price-sensitive buyers. Free shipping listings typically outperform. Consider offering 30-day returns to boost placement.
Etsy: Buyers pay more for handmade and unique items. Focus on story and quality — margin pressure is lower than Amazon or eBay if you have genuine differentiation.
Shopify (own website): Higher control, but you fund traffic. Factor customer acquisition cost (CAC) into your pricing model.
Testing Your Pricing
Do not assume your first price is optimal:
- Test two price points over 30 days
- Track conversion rate, not just revenue
- A higher price with better conversion rate beats a lower price with poor conversion
Use the Product Pricing Calculator to model different scenarios before committing to a price, and the Seller Fee Comparison to see which platform maximises your net profit at your target price.