What Margins Do Retailers Need? A Guide for Brand Owners
The Margin Stack: What Everyone Takes
Before your product reaches a consumer's hands, multiple parties need their cut. Understanding this "margin stack" is the single most important thing you can do before approaching wholesale.
The 40% + 40% Model
When you work with Brand Connections, the structure is simple and there are only two numbers to remember:
- Retailers make 40% — they buy at your wholesale price, which is the ex-GST RRP less 40% (ex-GST RRP × 0.60)
- Brand Connections pays you your wholesale price less 40%, 30 days end of month. That 40% is one all-in figure: it covers storage, pick and pack, freight and any distributor or trade-supplier margin along the way. There are no extra fees stacked on top.
This means if your product has a $50 RRP (inc GST):
| Step | Calculation | Price |
|---|---|---|
| RRP (inc GST) | Starting price | $50.00 |
| Ex-GST RRP | $50 / 1.1 | $45.45 |
| Retailer buys at (your wholesale price) | $45.45 x 0.60 | $27.27 |
| You receive | $27.27 x 0.60 | $16.36 |
| As a share of ex-GST RRP | $16.36 / $45.45 | 36% |
The $16.36 is what lands in your account. Whether the product is viable depends on what it costs you to make — which is the next step.
The Margin You Need to Keep
As a guide, we recommend keeping around 35–45% real margin after COGS on the amount you receive (the $16.36 in the example above).
Here's what different RRPs look like:
| RRP (inc GST) | Retailer Buys At | You Receive | Max COGS for a 35% Margin | Max COGS for a 45% Margin |
|---|---|---|---|---|
| $19.95 | $10.88 | $6.53 | $4.24 | $3.59 |
| $29.95 | $16.34 | $9.80 | $6.37 | $5.39 |
| $49.95 | $27.25 | $16.35 | $10.63 | $8.99 |
| $99.95 | $54.52 | $32.71 | $21.26 | $17.99 |
Notice that what you receive is always 36% of the ex-GST RRP, regardless of price point — what changes is whether your COGS fit underneath it. (Working: RRP ÷ 1.1 × 0.60 × 0.60.)
What If Your Margins Are Tight?
If your margin on the amount you receive falls below about 35%, you have a few options:
- Increase your RRP — if the market can bear it
- Reduce COGS — optimize packaging, ingredients, or manufacturing
- Create wholesale-specific SKUs — larger sizes with better margins
- Bundle products — higher average order value can offset thinner margins
Quick Margin Check
Want to know your exact margins? Chat with Alex — our AI assistant will calculate your brand margin in under a minute when you provide your RRP.