How to Price Clothing for Retail: Margin Math for Brands

August 20, 20267 min readBy Essty Garment

Pricing is where most new brands leave money on the table — or price so high they never sell. The math is simple; the discipline is not. Here's the formula, the standard markups, and the hidden costs that quietly eat your margin.

The Core Pricing Formula

Start from your true landed cost per unit, then apply a retail multiplier:

Retail Price = Landed COGS × Markup

Landed COGS includes FOB production plus shipping, duties, packaging, and fulfillment — not just the factory price. Many first-time brands price off FOB alone and discover the real cost is 20–30% higher by the time it reaches the warehouse.

Standard Markup Reference

Markup	Retail vs COGS	Typical use
2x (keystone)	50% margin	Baseline for apparel retail
2.5x	60% margin	DTC brands covering ad spend
3x	67% margin	Premium / low-volume positioning

Wholesale vs Retail

If you sell wholesale, your wholesale price is typically 50% of retail (a 2x markup on your COGS at wholesale). That means your retail math must leave room for a wholesale tier:

COGS: $20
Wholesale (to stockists): $40 (2x COGS)
Recommended retail (MSRP): $80 (2x wholesale = 4x COGS)

Set MSRP even if you sell DTC — it anchors perceived value and lets you discount without going underwater.

Margin killers: returns (budget 5–10% for apparel), payment-processing fees (~3%), ad spend (often 15–30% of revenue for DTC), and dead stock. A 60% headline margin can shrink to 20% net once these are counted. Price for the net, not the headline.

Factors That Should Move Your Price

Brand positioning: premium materials and storytelling support higher multipliers.
Channel mix: heavy DTC ad spend needs a 2.5x–3x to stay profitable.
Order volume: lower COGS at higher MOQ lets you hold price while improving margin.
Competitor band: anchor within your category's expected range; wildly off-price signals wrong positioning.

Tip: Run the math backwards from your target retail price. If you want $80 retail at a 2.5x multiplier, your landed COGS must stay under $32. Then go negotiate production to hit it — pricing discipline starts at the sourcing table.

Frequently Asked Questions

What is a good profit margin for clothing?

A 50–65% gross margin at retail is healthy for apparel. Net margin after ads, returns, and fees is typically much lower, so build the model on net, not gross.

What does "keystone pricing" mean?

It's a 2x markup — doubling your cost to set retail. It's the traditional apparel baseline and still a safe starting point for new brands.

How do I price if I sell both wholesale and DTC?

Set a retail MSRP first, then wholesale at 50% of MSRP. Make sure your COGS supports both tiers with margin left over; if not, renegotiate production cost before launching.

Should I discount below my COGS to clear stock?

Avoid it. Below-COGS discounting destroys margin and trains customers to wait for sales. Instead, bundle, or accept a smaller margin on the last units rather than going underwater.

Sourcing this category? Essty Garment is a Guangzhou-based free factory quote producing FOB pricing that leaves room for retail margin from 100 pcs per colour, with 10–15 day production and full private-label branding available.