BaketlyA shop offers to stock your bread, and asks for wholesale pricing. The usual answer is to take something off the market price and call it done. It feels fair, since 30% off sounds like 30% less money. It is not. It is far worse, and the reason is simple arithmetic.
A discount comes out of profit, not out of the price
The loaf costed across this blog takes $1.05 of materials and 24 minutes of work. At $12 an hour those 24 minutes are $4.80, so the loaf costs $5.85 to make. At the market it sells at $9.50, leaving $3.65.
Your costs do not move when the buyer changes. Flour, packaging and your 24 minutes cost the same whether the loaf goes on a stall or into a shop. So every dollar of discount comes straight out of the $3.65:
| Discount | Price | Profit per loaf | Profit lost |
|---|---|---|---|
| None (market) | $9.50 | $3.65 | 0% |
| 10% | $8.55 | $2.70 | 26% |
| 20% | $7.60 | $1.75 | 52% |
| 30% | $6.65 | $0.80 | 78% |
| 40% | $5.70 | −$0.15 | 104% |
At 30% off you have given away 78% of what the loaf earns. At 40% off the loaf costs you money: $5.70 against $5.85, a 15-cent loss on every one, and you have also spent the hours.
Why the market price has no room in it
Your market price is a retail price. If it is set properly, it covers materials and your time and leaves a margin. That is the point of it. But it means there is nothing spare: whatever you hand a stockist comes out of the part you live on. Shops need room to resell, so the discount they ask for is a real one, and a price that was only just right at retail is wrong the moment it is cut. It is the same trap as rules of thumb that ignore your hours: a price that looks sensible on a percentage and fails on the arithmetic.
The break-even discount depends on the item
The most you can discount before you lose money is the profit divided by the price. For the loaf that is $3.65 ÷ $9.50, or 38%. For the cinnamon bun, which costs $1.20 to make ($0.60 of materials and 3 minutes of work) and sells at $1.65, it is $0.45 ÷ $1.65, or 27%.
| Discount | Price | Profit per bun |
|---|---|---|
| 10% | $1.49 | $0.29 |
| 20% | $1.32 | $0.12 |
| 30% | $1.16 | −$0.04 |
So one wholesale discount across the whole list is wrong by construction: the same 30% that leaves the loaf a little profit sends the bun below cost. Thin-margin items are the ones a stockist's discount kills first.
Volume does not rescue it
The usual hope is that a shop buys in bulk. Test it. Forty loaves a week at the market earn 40 × $3.65 = $146.00. The same forty loaves wholesale at 30% off earn 40 × $0.80 = $32.00. To make up the $146.00 at that price you would need 183 loaves a week, and 24 minutes each is about 73 hours of baking. At 20% off, 84 loaves would do it.
More loaves means more hours, and your hours are the largest cost in the loaf (82% of it). A discount you recover by baking more is a discount paid for with your week.
Build the wholesale price up, not down
- Decide what a loaf must earn you. Say $2.00 clear. Add it to the $5.85 cost and the wholesale price is $7.85, which is 17% off the market price. That is your floor, not a starting offer.
- Price each item separately. The loaf can take a discount the bun cannot. Offer the stockist the items that can afford it.
- Count what wholesale really saves. You skip the stall and the selling hours, but not the baking. Put a number on the market costs you would drop and weigh them against the margin you give up, the way you would judge whether a market day paid.
If the number a shop wants is below your floor, the answer is a smaller range or a higher price, not a thinner loaf. Our guide to pricing baked goods sets out how to get the retail price right first, because the wholesale one is built on it.
The short version
One price cannot serve both channels, because the discount comes out of profit and profit is the smaller number. Work out the cost, decide what each item must earn, and quote wholesale from there.
Read next
- How do I price my baked goods?
- Did the market day pay for itself?
- Why the 4× rule underprices your sourdough
Questions
How much should I discount for wholesale?
Start from what you need to earn per loaf, not from a percentage. If you want $2.00 clear on the $5.85 loaf, the wholesale price is $7.85, which is 17% off $9.50. Any discount deeper than that has to be paid for by something else.
At what wholesale price do I start losing money?
When the price drops below what the item costs you to make, your own hours included. For the $5.85 loaf that is 38% off $9.50. For the $1.20 cinnamon bun it is only 27% off $1.65, which is why thin-margin items rarely survive a wholesale discount.
Is wholesale worth it if it saves me going to market?
Sometimes, but count what it actually saves. Wholesale spares you the stall and the selling hours, not the baking. Put a figure on the market hours and fees you would drop, and add them back before deciding the lower price is acceptable.
Should wholesale and market prices ever be the same?
Only if the market price has room in it. Most do not: a price set to cover costs and your time at retail has nothing spare to give a stockist. Either raise retail, or sell wholesale only the items whose margin can take it.
Can I just sell the loaves a shop would take that did not sell at market?
That is a fair use of leftovers, as long as you know the price is a floor-covering one. Surplus sold at a price that covers materials is better than waste, but it should not become the price you quote for a standing order.
Price each channel from its own cost
Baketly works out what each bake costs to make, your hours included, so you can see how much room a wholesale price really has before you agree to it.
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