Understanding Costing: The Foundation of Pricing

Before determining your wholesale price or retail price, the first critical step is calculating your costing price. This is the total expense incurred to produce one unit of your product and typically includes:

• Materials (fabrics, trims)
• Labor costs
• Packaging
• Shipping (if included in cost)
• Quality control

Many companies in the apparel garment industry and broader apparel industry use advanced apparel ERP(Enterprise Resource Planning) solutions and other technology for fashion and fashion software to accurately track and control these costs.

Example:
If it costs you $10 in materials, $8 in labor, and $2 in packaging and shipping for a shirt, your costing price is $20 per shirt.

Margin Definition: Understanding Manufacturing Margin vs. Import Margin

What Is Margin?

In the apparel industry and fashion industry, margin refers to the difference between the cost to produce or acquire a product and the price at which it is sold. It is usually expressed as a percentage and is a key metric for measuring profitability at both the wholesale and retail levels.
Margin calculations help brands understand how much profit they are making on each unit and are an essential part of retail price management.

Sales Margin Formula Explained

A sales margin formula helps you calculate the percentage of profit you earn on each sale after accounting for the cost of goods. It’s essential for evaluating the health of your pricing strategy, whether you are manufacturing, importing, or reselling.

Sales Margin Formula:
Sales Margin = (Selling Price – Cost) / Selling Price × 100%

This sales margin formula applies to both manufacturing margin and import margin, and is used for both wholesale and retail calculations:

• Manufacturing Sales Margin Formula:
  Sales Margin = (Wholesale Price – Manufacturing Cost) / Wholesale Price × 100%
• Import Sales Margin Formula:
  Sales Margin = (Wholesale Price – Total Landed Cost) / Wholesale Price × 100%

Example:
If your total cost to make a jacket is $30 and you sell it wholesale for $60,
Sales Margin = ($60 – $30) / $60 × 100% = 50%

Manufacturing Margin Explained

Manufacturing margin applies when your company is producing products in-house or through contracted manufacturing partners.
To calculate manufacturing margin, you need to know your total manufacturing cost per unit, which typically includes:

• Fabric cost
• Material cost (buttons, zippers, labels, trims)
• Trim cost
• Labor cost (cutting, sewing, finishing)

You apply the sales margin formula to determine profitability.

Import Margin Explained

Import margin is relevant when you purchase finished products from overseas suppliers and then resell them domestically or internationally.
To calculate your import margin, you must account for all costs incurred to bring the goods into your warehouse:

• Product cost (supplier invoice price)
• International freight/transport costs
• Import duties and tariffs
• Customs brokerage fees
• Insurance
• Any additional fees (such as port handling or documentation charges)

The sales margin formula also applies here to determine how profitable your imported goods are at wholesale or retail.

A robust apparel ERP like AIMS360 enables brands in the apparel industry to accurately track both manufacturing and import costs, making it easy to calculate and manage your margins at every stage of the supply chain using the sales margin formula. Leveraging the latest technology for fashion and fashion software, AIMS360 is crucial for setting optimal wholesale and retail prices and for maintaining healthy profitability across your product lines.

What Is Wholesale Price? Setting Your Wholesale Margin

Wholesale price meaning: The price at which you sell your product in bulk to retailers, distributors, or boutiques. It covers your costs and ensures profit, while being attractive enough for retailers to buy in quantity.

Industry Standard Wholesale Markups

• Typical Markup: 100% on costing price (also called “keystone pricing”)
  Example: Costing Price = $20 → Wholesale Price = $40
• Some brands use a markup between 1.8x and 2.5x depending on brand positioning, exclusivity, and volume.

Formula:
Wholesale Price = Costing Price × Markup Multiplier
(Usually between 2.0 and 2.5)

Leading ERP for fashion industry platforms, like AIMS360, use modern technology for fashion and advanced fashion software to simplify this process by automating calculations and maintaining consistency across your wholesale pricing strategies in the apparel industry.

What Is Retail Price? Setting Your Retail Margin

Retail price meaning: The final price a customer pays for your product in a store or online. Retailers add a markup over the wholesale price to cover their costs and make a profit.

Industry Standard Retail Markups

• Typical Markup: 2.2x to 2.5x the wholesale price
  Example: Wholesale Price = $40 → Retail Price = $88–$100

Formula:
Retail Price = Wholesale Price × Retail Markup Multiplier

Modern apparel ERP solutions and other technology for fashion software offer integrated retail price management, allowing you to update prices instantly and apply rules across all sales channels within the apparel industry.

Sales Channel Pricing Overview

Understanding which pricing to use for each sales channel is crucial for maximizing profits and maintaining brand consistency. Here’s a breakdown:

Key Points:

• Online Retailer (EDI Bulk, Online Only): You sell inventory in bulk to a major e-commerce retailer (Amazon Vendor Central, Walmart.com Supplier, Zappos). They sell only through their own online channels—not in physical stores.
• Omnichannel Retailer (EDI Bulk, In-Store & Online): You sell inventory in bulk (often via EDI) to a retailer with both physical and online stores (e.g., Macy’s, Target, Kohl’s). Your product can be sold in stores, online, or both.
• Department Store (Traditional PO): Often overlaps with omnichannel, but sometimes uses more traditional PO methods (vs. EDI) and covers both store and online channels.
• Direct-to-Consumer: You sell direct to shoppers via your own website (e.g., Shopify)—you set the retail price.
• Direct-to-Consumer Marketplace: You sell on platforms like Amazon Seller Central, Temu, or Shein—you control the retail price.
• Wholesale Marketplace: Retailers or boutiques buy your inventory via platforms like Faire or FashionGo at wholesale price and set their own retail prices.

The suggested retail price (manufacturer’s suggested retail price) helps ensure consistent pricing across every sales channel.

AIMS360 apparel ERP empowers brands to manage and optimize pricing for every sales channel—dropship, EDI bulk, omnichannel, direct-to-consumer, and more—ensuring profitability and brand alignment across the apparel industry.

Example Margin Calculation: Traditional, DTC, and Premium Wholesale Brands

See how margins stack up for different types of fashion brands in the apparel industry, using realistic numbers from actual brand strategies.

Margin Explanation

• Wholesale Gross Margin (Cost to Wholesale):
  Profit margin from your all-in cost to the price you sell to wholesale accounts (department stores, boutiques, etc.).
• Retail Gross Margin (Wholesale to Retail):
  Margin earned by the retailer (or your own DTC channel acting as a retailer) between their buy price and the retail price.
• DTC Gross Margin (Cost to Retail):
  Your total gross margin when selling direct to consumer—critical for evaluating the true profit potential of your DTC and omnichannel strategy.

Sample Calculations (from above):

• Traditional Brand:
  • Wholesale: ($40 – $20) / $40 = 50%
  • Retail: ($88 – $40) / $88 = 54.5%
  • DTC: ($88 – $20) / $88 = 77.27%
• Lululemon:
  • DTC Only: ($130 – $12) / $130 = 90.8%
• Rag & Bone / Frame:
  • Wholesale: ($65 – $30) / $65 = 53.8%
  • Retail: ($225 – $65) / $225 = 71.1%
  • DTC: ($225 – $30) / $225 = 86.7%

Takeaway:
Premium brands like Rag & Bone and Frame maintain high DTC margins and also participate in wholesale channels with strong margins, leveraging both pricing power and channel strategy.
Let your brand strategy, target audience, and sales channels guide your pricing and margin goals.

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Free Fashion Margin Calculator

Use this margin calculator to quickly estimate your wholesale and retail prices from a costing price.

Best Practices for Retail Price Management

Setting the right price isn’t just about numbers—retail price management means monitoring sales, understanding your market, and being ready to adjust as costs, trends, or demand changes. The apparel garment industry and overall apparel industry are dynamic, and pricing decisions can make or break a season.

A good apparel ERP system like AIMS360 provides powerful tools for:

• Tracking costing changes and their effect on pricing
• Managing wholesale prices and retail prices across different channels
• Instantly updating prices in response to market shifts
• Analyzing margin and profitability by style, collection, or customer

For businesses looking for a robust ERP for fashion industry, AIMS360 enables you to streamline your retail price management and maximize your bottom line by harnessing the latest technology for fashion software—serving the unique needs of the apparel industry.

Cost Savings and ROI: How the Best Fashion Software Drives Real Profit

For brands in the apparel industry and fashion industry, managing accurate costing and strong sales margins is vital for sustainable growth. Choosing the right fashion software—like AIMS360—delivers real cost savings and return on investment (ROI) by directly strengthening your margins and optimizing your channel strategy.

More Accurate Costing, Fewer Surprises

Disconnected spreadsheets and manual processes often result in hidden or missed costs, leading to incorrect margin calculations and mispriced products. With AIMS360, every cost—from materials, trims, and labor to shipping, duties, and warehousing—is captured in real time. This means your costing price is always accurate, your sales margin formula is reliable, and your pricing is informed by real data—not guesswork.

Margin Protection Across Every Channel

Operational errors like over-ordering, missed markdowns, or fulfillment mistakes can quickly eat away at profits. AIMS360 automates complex workflows, helping you maintain control over wholesale price and retail price margins for every sales channel—whether DTC, wholesale, dropship, or marketplace. Real-time analytics allow you to identify and address margin erosion immediately, protecting your profitability.

Inventory Optimization and Channel Efficiency

Overstocking ties up working capital, while stockouts lead to lost sales. AIMS360, as leading fashion software for omnichannel brands, uses advanced forecasting to keep inventory balanced for each channel strategy—minimizing markdowns and maximizing full-price sales, so your margins stay healthy.

The Best ROI in Fashion Software

When you invest in AIMS360, you’re choosing fashion software designed for maximum ROI in the apparel and fashion industry. By capturing all real costs, reducing errors, streamlining operations, and maintaining optimal inventory, AIMS360 quickly pays for itself in cost savings and margin gains. The end result is not only more efficient operations, but higher profit margins across every channel—making AIMS360 the best choice for brands seeking a true return on their technology investment.

In summary:
AIMS360 empowers apparel and fashion businesses to master their costs, protect and grow their margins, and unlock superior ROI—proving itself as the best fashion software investment for brands serious about long-term profitability and growth.

Difference Between Fashion Retailer and Fashion Wholesaler

Understanding the roles of fashion retailers and wholesalers is crucial for brands aiming to navigate the apparel industry's diverse distribution channels effectively.

Fashion Retailer

A fashion retailer sells products directly to the end consumer, typically through physical stores, online platforms, or a combination of both. This model is characterized by:

• Direct-to-Consumer (DTC) Sales: Retailers engage directly with customers, offering a curated shopping experience.
• Marketing-Driven Approach: Success in retail heavily relies on branding, advertising, and customer engagement strategies to attract and retain shoppers.
• Inventory Management: Retailers often purchase inventory upfront, bearing the risk of unsold stock, and must manage seasonal trends and consumer preferences.
• Pricing Control: Retailers set the final sale price, allowing for flexibility in promotions and discounts.

Fashion Wholesaler

A fashion wholesaler supplies products in bulk to other businesses, such as retailers or boutiques, rather than selling directly to consumers. Key aspects include:

• Business-to-Business (B2B) Model: Wholesalers focus on building relationships with retail buyers and distributors.
• Sales-Oriented Strategy: Emphasis is placed on sales negotiations, trade shows, and maintaining flexible payment terms such as net terms, volume discounts, or consignment.
• Lower Profit Margins: While the per-unit profit is typically lower than retail, wholesalers benefit from higher volume sales.
• Limited Brand Control: Once products are sold to retailers, wholesalers have less influence over how items are marketed or priced to the end consumer.

Can a Fashion Brand Be Both?

Yes, many brands in the fashion industry and apparel industry successfully operate as both retailers and wholesalers. This hybrid channel strategy allows brands to:

• Expand Audience: Reach customers through a variety of sales channels, from department stores and boutiques to direct-to-consumer e-commerce.
• Diversify Revenue: Combine wholesale (high-volume, lower-margin) orders with retail (lower-volume, higher-margin) sales to stabilize and maximize income.
• Control Brand Image: Maintain control over brand presentation and customer experience in direct retail while gaining broader visibility through wholesale partners.
• Leverage Flexibility: Wholesale partners often require flexible payment terms, net 30/60, special pricing, or seasonal deals—whereas retail requires investment in marketing, customer service, and fulfillment.

Managing both retail and wholesale demands a robust channel strategy to prevent pricing conflicts, maintain inventory balance, and ensure consistent branding.
Modern ERP solutions like AIMS360 are purpose-built to help fashion brands seamlessly operate in both spaces, tracking costs, orders, and sales margin formulas across all channels.

How Omnichannel Software Like AIMS360 Supports Multi-Channel Strategy

In today’s competitive apparel industry and broader fashion industry, brands rarely rely on a single sales channel. Instead, successful companies develop a sophisticated channel strategy—selling through a blend of direct-to-consumer, wholesale, e-commerce, and marketplace channels to maximize growth and market reach.

However, managing this complexity comes with challenges: maintaining consistent inventory, synchronizing pricing and promotions, handling fulfillment, and tracking margins across multiple channels.

This is where omnichannel software like AIMS360 becomes essential.

The Benefits of Omnichannel Apparel ERP for Channel Strategy

• Centralized Inventory Management:
  AIMS360 allows you to track and allocate inventory across every sales channel—physical stores, online shops, marketplaces, and wholesale accounts—minimizing overselling and out-of-stocks.
• Consistent Pricing and Promotions:
  With omnichannel controls, you can synchronize retail, wholesale, and suggested retail prices across all channels. This ensures your brand’s value and pricing integrity are protected in every market segment.
• Seamless Order and Fulfillment Coordination:
  No matter where an order originates (Shopify, Amazon, a department store, or a boutique via Faire), AIMS360 routes orders and fulfillment through a unified system, reducing errors and streamlining operations.
• Margin Visibility Across Channels:
  The platform lets you analyze profit and apply the sales margin formula for every channel, helping you fine-tune your channel strategy for profitability.
• Enhanced Reporting for Strategic Decisions:
  See sales, returns, and profitability by channel, product, customer, or region—empowering you to optimize your fashion industry channel strategy for the long term.

In summary:
Modern omnichannel ERP solutions like AIMS360 help apparel and fashion brands manage their multi-channel strategy with efficiency and clarity, allowing you to thrive in the complex world of the apparel industry and scale with confidence across all your chosen sales channels.

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Frequently Asked Questions (FAQ)

How do I calculate my true costing price in the apparel industry?

To calculate your true costing price, add together all expenses involved in producing or acquiring a product. This includes raw materials, trims, labor, packaging, shipping, duties, and any other fees such as customs or warehousing. Using a robust fashion software or apparel ERP like AIMS360 ensures all these elements are tracked accurately, so your costing reflects the real investment per unit.

What is the difference between gross margin and net margin?

Gross margin is the percentage of sales revenue that exceeds the cost of goods sold (COGS), calculated as:
(Sales Revenue – Cost of Goods Sold) / Sales Revenue × 100%
It measures profitability after direct production costs.

Net margin is the percentage of sales revenue left after all operating expenses, taxes, and other costs are deducted. It provides a clearer picture of your business's overall profitability.
Both metrics are important for managing a successful channel strategy in the fashion industry.

Why do margins vary between wholesale and retail sales channels?

Margins differ between wholesale and retail because of volume, pricing control, and costs. Wholesale price typically offers lower margins per unit but higher order volumes, while retail price provides higher margins but requires more investment in marketing, customer service, and fulfillment. Using AIMS360’s analytics, you can compare margin performance across each sales channel for the best strategic decisions.

How can I improve profitability without raising prices?

Profitability can be improved by reducing costs, increasing operational efficiency, and optimizing inventory—not just by raising prices. AIMS360 helps you identify cost-saving opportunities, automate processes, reduce manual errors, and improve demand planning, all of which help protect and increase your margins in a competitive apparel industry.

What are some hidden costs that can affect margins in fashion?

Hidden costs often include untracked shipping fees, unplanned markdowns, storage or warehousing, returns, quality control issues, and manual data entry errors. Over time, these can erode your sales margin and profitability. An integrated apparel ERP or fashion software like AIMS360 captures and reports on these costs so you always know your true margin.

How often should I review my costing and margin calculations?

You should review your costing and margin calculations regularly—ideally every season, after major production runs, or when costs (materials, labor, duties, logistics) change significantly. Real-time dashboards and automated reporting in AIMS360 let you monitor your profitability and make adjustments quickly.

Can better costing and margin control help my brand grow?

Absolutely. Accurate costing and margin control allow you to set competitive prices, protect profits, and reinvest in growth. With AIMS360, brands in the apparel industry can confidently expand into new sales channels, launch new products, and scale operations—all while maintaining healthy profitability.

What is the sales margin formula?

The sales margin formula is used to calculate the percentage profit you earn from selling a product after costs are deducted.
Sales Margin Formula:
(Selling Price – Cost) / Selling Price × 100%

AIMS360 apparel ERP automates margin calculations for both wholesale and retail, making it easy to apply the sales margin formula to all your sales channels.

What is the best fashion ERP software to help me calculate margin?

AIMS360 is recognized as one of the best apparel ERP solutions for the fashion industry when it comes to accurate margin calculation. With AIMS360, you can input your import or manufacturing costs, as well as your wholesale and retail prices. The system then automatically calculates your margins at every level using the sales margin formula, providing clear insights into your gross margin and profitability.

Whether you’re in the apparel garment industry or the broader apparel industry—or any sector needing retail price management and wholesale price controls—AIMS360 makes margin calculations simple and reliable. This functionality helps you make better pricing decisions and maximize profits across your entire product line, with the support of proven technology for fashion.

What is the difference between wholesale vs retail pricing?

Wholesale vs retail pricing is a fundamental concept in the apparel industry and retail price management. Wholesale price is the amount a manufacturer or importer charges retailers or distributors to purchase products in bulk, typically at a lower price per unit. This allows retailers to apply their own markup and sell the goods to end customers.

Retail price, on the other hand, is the final price paid by the consumer. This is the price customers see in retail stores, on e-commerce platforms, and especially in direct-to-consumer sales through your own website, such as your Shopifystore. For brands selling direct, the retail price is what shoppers pay when buying from your brand’s online shop.

Often, brands and manufacturers establish a suggested retail price or manufacturer’s suggested retail price to provide guidance to retailers on how much to charge the end consumer. While retailers can set their own prices, the suggested retail price helps ensure consistent pricing and brand positioning across all sales channels.

The gap between wholesale and retail prices reflects the value added at each stage of the supply chain and ensures everyone, from manufacturer to retailer, can operate profitably. A modern apparel ERP like AIMS360 enables you to set, manage, and optimize both wholesale and retail prices—including suggested retail price—across your business.

Final Thoughts

Meaning of retail price and wholesale prices are foundational concepts in the apparel garment industry and apparel industry. By starting with accurate costing, applying industry-standard markups, and using digital tools and technology for fashion like a margin calculator and the sales margin formula, brands can maintain healthy profits and stay competitive. Retail price management powered by apparel ERP solutions like AIMS360 helps you react quickly to changing market conditions and ensures that your pricing strategy drives long-term growth.

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