How to price your products profitably: margin maths for D2C brands

Many brands set prices by copying competitors, then discover they lose money on every order. Start from your costs, then check the market.

Step 1: List your per-order costs

Use the cost-per-order method. Split costs into two groups:

• Fixed per order: landed product cost, packaging, shipping, returns allowance.
• Percentage of price: payment gateway fee (plus GST on it) and any platform fee on sales.

Step 2: Choose a target margin

Decide how much you want to keep from each order before marketing, as a share of price. Many brands aim for a contribution margin that comfortably covers customer acquisition and leaves profit. Your category and repeat rate decide what is right. Write the number down.

Step 3: Solve for the price

Price = fixed per-order costs ÷ (1 − percentage fees − target margin)

All numbers here are before GST on the product, which you add on top for the customer.

A worked example (illustrative)

• Landed cost ₹520, packaging ₹40, shipping ₹85, returns allowance ₹24 = ₹669 fixed per order.
• Gateway fee 2% plus 18% GST on the fee = about 2.36% = 0.0236.
• Target margin 30% = 0.30.

Price = 669 ÷ (1 − 0.0236 − 0.30) = 669 ÷ 0.6764 ≈ ₹989.

Check: percentage fees ₹23, margin ₹297, costs ₹669. The total is ₹989.

If your platform also takes a percentage of sales, add it to the percentage fees. See what platforms really cost.

Step 4: Check the market

Compare your price with similar products. If you are far above, ask whether your brand, quality or story justifies it. If you are below, you may be leaving margin on the table. If the market price is lower than the price you need, fix costs, not just the label.

Step 5: Pick a price point customers like

Round to a price that feels natural, such as ₹999 rather than ₹989 or ₹1,001. Use bundles and "buy two" offers to lift order value, while keeping the maths intact (discounts and margin).

A note on GST and MRP

Shoppers in India usually see prices that include GST, and packaged goods must carry a maximum retail price that includes taxes. Rules on declarations and pricing differ by product type, so check with your accountant or the relevant regulator before printing labels.

Include discounts and returns in the plan

If you plan to discount often, build that into the target margin, because a "10% off" price is your real price. Track returns by product, and raise price or fix the cause for items with high return rates.

Review often

Rebuild the table each quarter, or when couriers, gateway fees or your supplier prices change. A small increase in shipping cost can erase a thin margin.

What to do next

Choose your three best sellers and calculate the price needed for your target margin. Compare it with the current price. Any gap is a priority.