Keystone pricing calculator for apparel brands

For planning only. Retailer margin expectations vary by retailer, category and terms. Confirm with each buyer before you set wholesale prices.

What is keystone pricing?

Keystone pricing means setting the retail price at twice the wholesale price. That is a 100 percent markup on what the retailer paid, which leaves the retailer a 50 percent margin at full price.

In apparel the word gets used on both sides of the sale. Retailers keystone a brand's wholesale price to set retail. Some brands also talk about keystoning their own cost, meaning a wholesale price around double landed cost. The math is the same either way.

• Retail price = wholesale price x 2
• Retailer margin = (retail price - wholesale price) / retail price = 50%
• Markup on cost = (retail price - wholesale price) / wholesale price = 100%

Markup is not margin

Most pricing arguments between brands and buyers come from mixing these up. Markup is measured against cost. Margin is measured against the selling price. The same multiple gives two very different percentages.

Margin = 1 - (1 / multiple). Markup = multiple - 1.

How apparel pricing stacks from cost to shelf

Two margins sit between your landed cost and the shelf: yours on the wholesale price, and the retailer's on the retail price. They multiply, which is why a small change at the factory turns into a big change at retail.

• Landed cost: $12.50
• Your 55% wholesale margin: $12.50 / (1 - 0.55) = $27.78 wholesale
• Retailer at keystone: $27.78 x 2 = $55.56, rounded up to $58 on the ticket

That garment lands on the shelf at about 4.4 times its landed cost. It also means every extra dollar of landed cost adds about $4.44 to the retail price if both margins hold. A $1 trim upgrade is a $4 retail decision.

Price from the shelf down, not the factory up

Brands that start from the factory quote end up with retail prices their customer will not pay. Start with the price your customer expects to see, then work back to what the factory has to hit. Switch the calculator to "A target retail price" to do this.

• Target retail: $78
• Retailer at keystone: $78 / 2 = $39 maximum wholesale
• Your 55% margin: $39 x (1 - 0.55) = $17.55 maximum landed cost
• Duty, freight and fees adding 25% of the factory price: $17.55 / 1.25 = $14.04 maximum factory price to quote

Put that target on the costing page of your tech pack before the first sample, and you will know straight away whether the factory quote works.

When keystone is not enough for the retailer

Keystone gives the retailer 50 percent at full price. Markdowns eat into that fast:

• 30% off: the retailer's margin falls to 28.6%
• 40% off: it falls to 16.7%
• 50% off: it falls to zero

That is why retailers that expect to mark down ask for a higher initial markup, or for markdown money, a credit from the brand that covers part of the margin they lost. If a buyer asks for either, run both scenarios here before you agree. Markdown money often shows up later as a deduction on your invoice payments, covered in the chargebacks and deductions guide.

Keystone and your own direct sales

If you sell direct as well as wholesale, your site should sell at the same retail price your retailers do. You keep the full retail margin, 77.5 percent in the example above. Undercutting your retail partners on your own site is one of the fastest ways to lose them.

Frequently asked questions

Is keystone the same as a 50 percent markup?

No. Keystone is a 100 percent markup on cost, which works out to a 50 percent margin on the selling price. Confusing the two is the most common pricing mistake in wholesale.

How do I calculate retail price from wholesale?

Multiply the wholesale price by the retailer's markup multiple. At keystone the multiple is 2, so a $30 wholesale price becomes $60 retail. A retailer that wants a 60 percent margin uses 2.5, so the same item retails at $75.

What wholesale margin should an apparel brand target?

There is no single right number. Your wholesale margin has to cover everything below gross margin: design, sales commissions, chargebacks, freight to retailers and overhead. Work out what those cost as a percentage of wholesale revenue, add the profit you need, and that is your floor.

Why do apparel prices often end in 8?

It is a common convention in apparel and footwear, such as $48, $68 or $98. The calculator can round your suggested retail up to the next price ending in 8, or to the next whole dollar.

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