How to Price Products for an Online Store: A Simple Method
Work out your real costs, check competitor prices, and pick a pricing approach that keeps you profitable.
Pricing decides whether every sale makes you money. Price too high and shoppers compare and leave; price too low and you work hard for nothing. A simple, repeatable method helps you set prices with confidence.
Step 1: Calculate your real cost per sale
Add up everything a sale costs you, not just the product:
- Product or making cost.
- Packaging.
- Shipping (if you offer free delivery).
- Payment gateway or marketplace fees.
- Average returns and damages.
- Advertising cost per sale.
- Taxes that apply to you.
Many new sellers forget shipping, returns and ad costs โ and discover later that bestsellers were losing money.
Step 2: Set your minimum price
Minimum price = total cost per sale + the smallest profit you are willing to accept. Never go below this, even during sales.
Step 3: Research the market
Look at what similar products sell for on search results, marketplaces and competitor stores. Note price, delivery cost and speed, return policy and how products are presented. The competitor product research tool helps you compare products side by side. Read how to do competitor product analysis.
Step 4: Choose a pricing approach
- Cost-plus โ cost plus a set margin. Simple and safe.
- Market-based โ priced around competitors, adjusted for your strengths.
- Value-based โ priced on what the product is worth to the customer, for unique or premium products.
- Psychological pricing โ โน999 instead of โน1,000, or price tiers like good/better/best.
Step 5: Decide on shipping
Free shipping can lift conversions, but its cost must be built into prices or a minimum order value. A free-shipping threshold slightly above your average order can raise basket size. See how to set up shipping in Merchant Center for showing delivery costs in Google Shopping.
Step 6: Test and review
Change prices on a few products at a time and compare sales and profit over several weeks. Review prices whenever costs, shipping rates or competitors change.
Be honest with discounts
Show real sale prices against genuine regular prices. Inflated "original" prices mislead customers and can break platform and advertising policies. See how to add a sale price in Merchant Center.
A worked example
A candle maker priced candles at โน299 based on materials alone. After adding packaging, shipping, gateway fees and the cost of breakages, each sale left almost no profit. They raised the price to โน399 and introduced a three-candle gift box at โน999 with free delivery. Fewer single candles sold, but gift box sales grew and overall profit more than doubled.
A simple pricing worksheet
- Product cost: โน____
- Packaging: โน____
- Shipping (if free to customer): โน____
- Payment or marketplace fees: ____%
- Returns and damages (average): ____%
- Advertising per sale: โน____
- Target profit per sale: โน____
Add the costs, then work out the selling price that leaves your target profit after percentage fees. Fill this in for every product before you list it.
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Frequently asked questions
Should I be the cheapest seller?
Rarely. Compete on value, service and trust rather than only price.
How much margin should I aim for?
It varies by category. Calculate your real costs first, then decide what margin keeps the business sustainable.
Should prices end in 9?
It is common and can work, but test it for your audience.
How often should I review prices?
At least every few months, and whenever costs change.