How to set wholesale, retail and MAP prices for a DTC brand

Set your retail price (MSRP) first, then set wholesale at the share of MSRP that stores expect, then set a minimum advertised price (MAP) at or just below MSRP so no seller advertises below it. If your cost does not leave room for that wholesale price, fix the cost or the MSRP before you approach a buyer.

What do MSRP, wholesale and MAP mean?

MSRP is the price you suggest the shopper pays. Wholesale is the price the store pays you. MAP is the lowest price a seller may advertise your product at, set by you and agreed in writing with your resellers. MAP controls advertised prices only, so confirm with a lawyer how it applies in your market and how to write the policy.

How do you set the wholesale price?

Start from MSRP and apply the share your buyers expect. Many retailers look to buy at about half of retail, and some categories differ, so ask three or four buyers what they expect before you fix the number.

Assume an MSRP of $30.00 and a store that expects to pay 50%. Wholesale is $15.00. If your cost to make and pack the unit is $6.00, you earn $9.00 per unit, a 60% gross margin on the wholesale price.

What if the numbers do not work?

When your margin after wholesale is too thin, you have four options. Raise MSRP, lower your cost per unit, change the pack size, or accept less margin on this channel. Test each against your own floor. For example, a $3.00 reduction in cost on the example above lifts profit from $9.00 to $12.00 per unit with no change to the shelf price.

Avoid cutting wholesale below what stores expect just to win the first order. A low wholesale price is hard to raise later, and stores that know the price will resist an increase.

How do you stop stores and your own site from undercutting each other?

Write a MAP policy and send it to every store with your price sheet. The policy should state the MAP for each product, how you will notice violations, and what happens if a store ignores it, for example a warning and then a pause on shipments. Put your own website under the same rule. If you run a sale on your site below MAP, stores will notice and may stop buying.

Keep promotions simple: offer stores a trade discount on a larger order instead of letting them discount the shelf price.

What should a price sheet include?

A one-page price sheet should list each product with its SKU, UPC, wholesale price, MSRP, MAP, case pack, minimum order and your payment terms. Put the lead time on the same page, since buyers ask about it before they ask about anything else. Keep it a single page so a buyer can forward it to a partner or manager.

What to do this week

• Ask three store owners or buyers what share of retail they expect to pay for products like yours.
• Build a table with MSRP, wholesale, MAP and your cost for every product, and mark any product that falls under your margin floor.
• Draft a one-page MAP policy and have a lawyer review it before you send it to stores.