Part of our Inventory Guide series
Pricing affects everything—margins, sales, perception. Price too high and customers go elsewhere. Price too low and you leave money on the table. Here's how to find the sweet spot.
Pricing Methods
Keystone Pricing
The simplest method: double your cost.
- Formula: Selling Price = Cost × 2
- Margin: 50%
- Example: $10 cost → $20 retail
Best for: Quick pricing decisions, general merchandise
Cost-Plus Pricing
Add a fixed percentage above cost.
- Formula: Selling Price = Cost × (1 + Markup%)
- Example: $10 cost × 1.75 = $17.50 (75% markup, 43% margin)
Best for: Consistent margins across categories
Market-Based Pricing
Price according to competition.
- Research competitor pricing
- Position above, below, or at market
- Consider your differentiation
Best for: Commodity items with easy price comparison
Value-Based Pricing
Price according to customer perception.
- What would customers pay for this?
- What's the perceived value?
- Less tied to cost
Best for: Unique items, premium products, exclusive brands
Category-Specific Guidelines
Disposable Vapes
| Scenario | Markup | Margin |
|---|---|---|
| Premium brand | 40-50% | 30-35% |
| Standard brand | 50-65% | 35-40% |
| Value brand | 75-100% | 40-50% |
Glass
| Type | Markup | Margin |
|---|---|---|
| Import hand pipes | 100-200% | 50-67% |
| Import bongs | 80-150% | 45-60% |
| American glass | 50-100% | 35-50% |
| Premium/art | 40-80% | 30-45% |
Kratom
| Format | Markup | Margin |
|---|---|---|
| Powder | 75-100% | 40-50% |
| Capsules | 100-150% | 50-60% |
| Shots | 60-100% | 40-50% |
Accessories
| Item | Markup | Margin |
|---|---|---|
| Grinders | 80-120% | 45-55% |
| Papers | 80-100% | 45-50% |
| Lighters | 100-150% | 50-60% |
| Screens/misc | 150-200% | 60-67% |
Psychological Pricing
Price Endings
- .99 pricing: $19.99 feels less than $20
- Rounded prices: $20 can feel premium
- Odd prices: $19.47 suggests calculated value
Price Anchoring
- Display premium option first
- Mid-tier seems more reasonable after seeing high price
- Good-better-best structure
Competitive Pricing
Know Your Competition
- Shop competitors regularly
- Note pricing on comparable items
- Understand their positioning
When to Match
- Commodity items (cigarettes, major brands)
- Products customers know exact price
- Items where you're clearly overpriced
When Not to Match
- Unique items competitors don't have
- When your service/experience is better
- If matching would destroy margins
Promotions and Discounts
Effective Promotions
- Volume discounts: Buy 3 get 10% off
- Bundle deals: Vape + charger + extra pods
- Loyalty rewards: Points/rewards earned
- Loss leaders: Low-margin item drives traffic
Avoid
- Constant markdowns (trains customers to wait)
- Deep discounts that destroy margin
- Complicated deals customers don't understand
Price Changes
When to Raise Prices
- Your costs increased
- Competitors raised prices
- Demand exceeds supply
- You're consistently selling out
When to Lower Prices
- Inventory not moving
- Competitors are cheaper
- Product approaching expiration
- Strategic loss leader situations
Frequently Asked Questions
Should I price match big retailers?
Generally no. You can't compete on price with Walmart/Amazon. Compete on selection, service, and convenience instead.
How do I know if I'm priced right?
If everything sells immediately, you're probably too cheap. If nothing moves, probably too expensive. Target turn rates by category.
What margin should I target overall?
Aim for blended gross margin of 40-50%. Some categories will be higher, some lower.