Start with Landed Cost, Not Competitor Prices
The most useful number in clothing pricing is your landed cost per unit: everything it costs to get one finished, sellable garment into your hands. Competitor prices tell you what the market will tolerate, but only your own costs tell you whether you can survive at that price. Landed cost normally includes:
- The factory price per garment (including fabric, trims and labels if you buy on a full-package basis).
- Sampling and development costs, spread across the production run.
- Testing and quality inspection.
- Freight and insurance, plus customs broker and port fees.
- Import duty and any import VAT you cannot recover. Our guide to importing clothing from Bangladesh explains these in detail.
- Packaging, hangtags and polybags.
- Inbound delivery to your warehouse.
If you only compare the factory's unit price, you will underestimate your true cost, often by 15–30% depending on the route and the order size. Always price from landed cost. A fuller breakdown is in our clothing manufacturing cost guide.
Margin vs Markup: Two Different Numbers
Markup and margin are both percentages, but they are calculated differently and confusing them is a classic mistake.
- Markup is the amount added to cost, expressed as a percentage of cost. A £10 cost with a £10 markup is a 100% markup.
- Gross margin is the profit expressed as a percentage of the selling price. A £10 cost sold at £20 is a 50% gross margin.
The formulas are simple. Selling price = cost ÷ (1 − target margin). So to achieve a 50% margin on a £10 cost you divide £10 by 0.5 to get £20. Many brand owners quote “50% markup” when they mean 50% margin, and end up pricing too low. Decide which language your team will use and apply it consistently.
How Wholesale and Retail Prices Relate
If you sell both to retailers and direct to consumers, your two prices must work together. The long-standing rule of thumb in fashion is keystone pricing: the retailer doubles the wholesale price to reach retail. Your wholesale price is therefore roughly half your recommended retail price, and your landed cost should be around a quarter or less of the retail price to leave room for your own margin.
In practice, many brands aim for a structure along these lines (illustrative, not universal):
| Price level | Typical relationship | Example (£) |
|---|---|---|
| Landed cost | About 20–30% of retail (ex-VAT) | £12.00 |
| Wholesale price | About 50% of retail (ex-VAT) | £25.00 |
| Retail price (ex-VAT) | Wholesale × 2 | £50.00 |
| Retail price (inc. 20% VAT) | Ex-VAT × 1.2 | £60.00 |
In this example the brand makes £13 per unit gross profit on wholesale sales (a 52% gross margin) and could earn considerably more selling direct at £50 ex-VAT, although direct selling carries marketing, fulfilment and returns costs that wholesale does not. Treat the figures as a model for your own spreadsheet, not as a benchmark: the right ratios depend on your category, quality level and channel costs.
Pricing in the UK: Where VAT Fits
UK consumers expect to see VAT-inclusive prices, while wholesale prices are normally quoted ex-VAT. If your business is VAT-registered, you charge 20% VAT on standard-rated clothing sales and pass it to HMRC, so it is not your income. Work out your margin on the ex-VAT price. A £60 shelf price is really £50 of revenue and £10 of VAT.
Registration becomes compulsory once your taxable turnover passes the UK VAT threshold, which is £90,000 for 2026/27. If you are below it you may still register voluntarily, which lets you reclaim VAT on business costs but means your prices must include VAT. See GOV.UK's guidance on registering for VAT and our guide to starting a clothing brand.
A Step-by-Step Pricing Method
- Calculate landed cost per unit for each style, using a realistic order quantity.
- Set a target gross margin that covers marketing, returns, platform fees, staff and profit. Many apparel brands aim well above 50% on direct sales; check what works for your category.
- Work back to a retail price using the margin formula, then adjust to a psychologically sensible price point.
- Set a wholesale price at roughly half of ex-VAT retail, and check your margin at that level.
- Stress-test the price against discounts, returns and a rise in freight or fabric cost.
- Compare with competitors to confirm your position is credible for your quality and brand story.
Costs That Quietly Erode Margin
Even a correct landed-cost sheet can overstate profit. Allow for the following when you set prices:
- Returns and exchanges. Online fashion can see high return rates, and each return costs shipping, handling and sometimes unsellable stock.
- Discounts and sales. If you promote at 20% off, a 50% margin falls to about 38%. Price with promotions in mind.
- Payment and platform fees on your website, marketplace or wholesale platform.
- Marketing and customer acquisition, which for a new brand can be a substantial share of revenue.
- Unsold stock, the biggest silent cost. Smaller first orders reduce it, which is one reason brands choose low-MOQ manufacturers.
Worked Example: Pricing a Hoodie from Landed Cost
Suppose a brand orders 500 heavyweight hoodies. The illustrative landed cost per unit is built up like this: factory price £14.00, inspection and testing £0.40, freight and insurance £0.90, duty £0.00 (assuming preferential origin is proven), customs and port charges £0.35, packaging and labels £0.60 and delivery to the UK warehouse £0.25. That brings landed cost to about £16.50. These numbers are invented to show the method, not a quote.
Now work backwards. If the brand wants a 65% gross margin on direct sales, it divides £16.50 by 0.35, giving an ex-VAT price of about £47. With 20% VAT, the shelf price is £56.40, which the brand rounds to £55 or £59 depending on its price-point strategy. For wholesale, half of the £47 ex-VAT retail price is £23.50, so a retailer buying at £23.50 and selling at £47 ex-VAT earns the keystone margin, while the brand earns £7 per hoodie, a 30% gross margin. That is far thinner than the direct-sales margin, which is why many brands cap wholesale volumes, raise their price slightly or negotiate a lower landed cost through bigger reorders.
Running this arithmetic before you commit tells you immediately whether a style can support a wholesale channel at all. If the numbers only work at full retail price with no discounting, the product is too expensive to make for the price point and needs a cheaper fabric, a simpler construction or a higher price.
Wholesale Terms That Affect Your Price
- Minimum order value or quantity per retailer, which protects you from small, expensive-to-serve orders.
- Payment terms. Offering 30-day terms improves a retailer's cash flow but delays yours; factor the financing cost into your price.
- Line sheets and recommended retail price, so the buyer can see the margin they will earn.
- Seasonal and volume discounts, which should be planned, not improvised under pressure.
- Delivery and returns policy, since free carriage or sale-or-return arrangements both reduce your real margin.
Pricing and Brand Positioning
Price is a signal. A heavyweight hoodie with premium fabric and a considered fit priced like a fast-fashion basic invites doubt, while an unremarkable T-shirt priced like a luxury item invites disappointment. Match your price to the evidence a customer can see: fabric weight, finish, fit, packaging, sustainability credentials and brand story. Details such as fabric GSM and cotton quality give you concrete reasons for a higher price and help customers understand what they are paying for.
For wholesale, remember that your buyer needs to make their own margin. If your recommended retail price is much higher than comparable products in the same store, a buyer may decline even if your quality is excellent. Start conversations with a clear line sheet showing wholesale price, recommended retail price and minimum order.
Review Prices After Each Production Run
Prices are not fixed forever. After each order, update your landed cost with actual freight and duty, check sell-through and discount rates, and look again at whether the margin still works. If you reorder at a higher volume, your unit cost should fall, giving you either a better margin or room to lower the price. A short monthly review of margin by product is one of the cheapest ways to protect a clothing business.
How Ruhrose Supports Pricing Decisions
We give brands clear quotes and an indicative breakdown early, so you can build a landed-cost sheet before you commit. With low minimums from 500 pieces per style and colour, you can test a price point on a smaller run and adjust before scaling. Start a product enquiry to discuss quantities and target costs for your range.