Many jewellery businesses think they know their margin until they add up transport, packing, breakage and discounts. This guide shows a clean way to calculate it, so your pricing to retailers and customers is based on real numbers.
Step 1: Work out landed cost
Landed cost is everything you pay to get one unit onto your shelf or into your warehouse:
- Factory price per unit (from the invoice)
- GST paid, if you cannot claim it as input credit
- Share of transport and freight
- Share of any extra packing or tagging
- An allowance for damaged or unsellable units
Example: you buy 400 units. Transport for the consignment is a fixed amount; divide it by 400 to get the per-unit share. Add the extra packing you do. Add a small allowance for units you expect to discount or write off.
Step 2: Know markup vs margin
- Markup is profit as a percentage of cost.
- Margin is profit as a percentage of selling price.
Mixing the two is the most common pricing mistake in the trade. A worked example: a necklace set costs Rs 250 from the factory, plus 3% GST that you claim back as input credit.
| Line | Amount |
|---|---|
| Factory price | Rs 250 |
| Transport, packing and handling per set | Rs 15 |
| Landed cost | Rs 265 |
| Selling price to retailers, before GST | Rs 350 |
| Gross profit per set | Rs 85 |
| Margin on selling price | about 24% |
| Markup on cost | about 32% |
The same Rs 85 is a 24% margin and a 32% markup.
Step 3: Price for your channel
Different channels carry different costs, so work out the margin separately for each rather than using one number everywhere:
| Channel | What the price must cover |
|---|---|
| Selling to retailers as a distributor | Your costs and margin, credit, delivery and visit costs, and room for the retailer's margin |
| Your own retail counter | Rent, staff, display and discounts, so retail markup is higher |
| Online marketplace | Commission, shipping, returns and ads |
| Exhibitions | Stall and travel costs for a short burst of sales |
| Export | Freight, duties at destination, currency risk |
A wholesaler selling to shops must leave the retailer enough room to reach a sensible MRP. Work backwards from the MRP the market accepts.
Step 4: Work backwards from MRP
- Find the MRP customers accept for the piece.
- Subtract the retailer's margin to get your selling price.
- Subtract your target margin to get the landed cost you can afford.
- Subtract transport and packing to get your target factory price.
Now you can go to a manufacturer and say: "I need this look at this factory price." A good factory will suggest adjustments to hit it.
Step 5: Track sell-through, not just margin
A high-margin design that sits for a year is worse than a medium-margin design that sells out in a month. Track sell-through per design and put your volume behind the fast movers.
Common leaks that eat margin
- Transport not allocated to unit cost
- Discounts and festival offers
- Broken or tarnished units written off
- Marketplace returns
- Slow stock that ties up cash
Dead stock is not neutral: it ties up money and eventually sells at a loss. Include an allowance for slow movers when you set margins on new, untested designs, and keep tighter margins only on proven best sellers where the risk is lower.
Using factory pricing to protect margin
Buying direct from a manufacturer removes a layer of margin between you and the source. At 200+ units per design, that difference often decides whether a design is worth stocking. See how we supply wholesalers or read distributor margin structure.
How discounts eat margin
A 10% discount on a Rs 350 selling price cuts the price by Rs 35, but it cuts the Rs 85 profit by the same Rs 35, a 41% fall in profit per set. To earn the same total profit after a 10% discount, you would need to sell about 70% more sets. Before agreeing a discount, work out how many extra pieces it has to sell to be worth it.