How to price your products for profit (without guessing)

"Just double the cost" is the most common pricing advice in e-commerce, and it's also how thousands of sellers end up working for free. A 100% markup feels generous until marketplace fees, shipping, returns, and ad spend quietly claw it all back. Here's a method that prices for the profit you actually keep.

Start with your true unit cost

Your real cost is more than the product:

• Product / manufacturing cost
• Inbound shipping and duties
• Packaging
• Per-unit share of returns and breakage

Add these up before you do anything else. If a product costs $8 to buy, $1 to ship in, and $1 in packaging, your true unit cost is $10, not $8.

Decide on a target margin, not a markup

This is where most pricing goes wrong. Margin is profit as a share of the selling price; markup is profit as a share of cost. A 50% markup is only a 33% margin, so "adding 50%" leaves you thinner than you think.

To hit a target margin, use:

Price = cost ÷ (1 − target margin)

For a 50% margin on a $10 cost: 10 ÷ (1 − 0.5) = $20. The Profit Margin Calculator does this both ways and shows the markup equivalent so you never confuse the two.

Subtract the fees you'll actually pay

Your target margin is gross. It doesn't survive contact with a marketplace. Before you commit to a price, run it through the relevant fee calculator:

• Shopify Fee Calculator
• Amazon FBA Profit Calculator
• Etsy Fee Calculator
• eBay Fee Calculator

If a $20 price leaves only a 20% net margin after fees and shipping, you either raise the price or cut cost, before you launch, not after.

Build in headroom for the things that go wrong

A durable price absorbs:

• Returns: even 5% of orders coming back changes the math.
• Ads: if you'll pay to acquire customers, that cost lives in the price.
• Discounts: if you run 20%-off promos, price so they're still profitable.

A useful rule: target a gross margin high enough that you can lose 10-15 points to fees and promotions and still profit.

Test against the market

Finally, sanity-check against competitors. If your profitable price is far above the market, the problem is usually cost, not pricing, renegotiate sourcing, increase order quantity, or change the product. Racing to match a price that loses money just loses money faster.

The bottom line

Price from your true unit cost, set a target margin (not markup), then subtract real fees and headroom for returns and ads before you commit. Use the Profit Margin Calculator to set the price and a fee calculator to confirm the net margin survives. Pricing isn't a guess, it's a formula you can run every time.