How to price your products for an online store

Pricing is one of the most consequential decisions you make when setting up an online store. It shapes your margins, positions your brand, and signals value to buyers before they even read a product description. Yet many store owners set prices without a clear method, often by guessing, copying competitors, or defaulting to "cover costs and add something".

There is no single correct pricing approach. The right method depends on your product type, your cost structure, and who your buyers are. Understanding the options gives you a framework to make informed decisions, not just educated guesses.

What costs do you need to include before setting a price?

The most common pricing mistake is not knowing the true cost of selling a product. Undercounting costs leads to prices that look profitable on paper but eat into margins in practice.

Before setting any price, add up all of the following for each product:

• Product cost: What you pay to make or buy the item. For resellers, this is your wholesale or supplier price. For manufacturers, it includes materials and production labor.
• Shipping cost: What it costs to get the product to the buyer. This includes packaging materials, carrier fees, and any dimensional weight adjustments for larger items.
• Transaction fees: Payment processors charge a percentage per transaction, typically between 1.5% and 3.5% depending on the provider and payment method.
• Returns: Returns are not free. A realistic return rate needs to be baked into your pricing model, especially in product categories where returns are common (clothing, shoes, electronics).
• Marketing spend: If you are running ads or paying for any promotion, a portion of that cost is attributable to each sale. Ignoring it means your marketing spend is quietly eating your margins.

Once you have a full cost figure, you have a floor. Your price must sit above this number to generate any profit at all.

What is cost-plus pricing?

Cost-plus pricing is the simplest method. Take your total cost per unit and add a percentage markup. If a product costs you $20 all-in and you want a 50% margin, you price it at $40.

The formula is straightforward: Price = Cost / (1 - desired margin). At a 50% margin target on a $20 cost, that gives you $40.

Cost-plus pricing is easy to calculate and ensures you do not sell at a loss. The limitation is that it ignores two important factors: what competitors are charging and what buyers are willing to pay. A product priced at $40 because your costs are $20 may be too expensive if the market norm is $30, or it may leave money on the table if buyers routinely pay $70 for similar items.

Use cost-plus pricing as a baseline check, not your final answer.

How does competitive pricing work?

Competitive pricing means setting your price based on what comparable products sell for. It requires actual research, not assumptions.

To do it properly, find five to ten products that buyers would genuinely consider as alternatives to yours. Note their prices, their shipping costs, any subscription or bundle pricing, and how they position themselves. The goal is to understand the price range buyers encounter when shopping for what you sell.

What competitive research tells you is the range buyers expect to see. A price at the low end of that range signals value or budget. A price at the high end signals quality or premium. A price well above the range needs something obvious to justify it. A price well below the range may raise questions about quality rather than attract buyers.

What competitive pricing does not tell you is whether those competitors are profitable at those prices. If a competitor is pricing at a loss to gain market share, matching that price might not make sense for your brand. You do not know their cost structure, their supplier relationships, or their margins. Copy prices with caution.

What is value-based pricing?

Value-based pricing sets the price based on what the product is worth to the buyer, not what it costs to produce. It is the most powerful pricing approach for brands with differentiated products, but it requires a clear understanding of your buyer.

Take a productivity tool that saves a professional five hours a week. The cost to build that tool may be modest. But five hours per week at the buyer's hourly rate is significant. Value-based pricing would look at that number and set a price that reflects the outcome delivered, not the production cost.

The same logic applies to physical products. A handmade ceramic mug costs more to produce than a mass-manufactured one. But the buyer is not just paying for clay and time. They are paying for craftsmanship, uniqueness, and the story behind it. Value-based pricing captures that.

To price on value, you need to answer: What does the buyer get from this that they cannot easily get elsewhere? What is that worth to them specifically? The answer informs a price that can sit above the market average while still feeling fair to the right buyer.

Your pricing decisions connect directly to your overall brand model. For background on how different store types approach pricing, see our article on e-commerce brand models.

How does psychological pricing work?

Psychological pricing uses the way buyers perceive numbers to influence purchase decisions. A few proven approaches:

Charm pricing: Prices ending in 9 (like $29 instead of $30) have consistently performed better in pricing research. The left digit changes, and that is what buyers register first. $29.99 feels meaningfully different from $30 even though the difference is one cent.

Anchoring: Showing a higher "original" price next to a discounted price makes the discounted price feel like a better deal. This works when the original price is credible. If buyers suspect the original price was never real, anchoring backfires and damages trust.

Bundle pricing: Offering three items together for less than buying them separately increases the perceived value and often raises average order value. Bundles work well for complementary products where the buyer would naturally use all three together.

Psychological pricing tactics are tools, not strategies. They work alongside a sound pricing structure, not instead of one.

What pricing mistakes should you avoid?

Take any new online store and you will find the same errors appearing at the same stage.

Pricing too low to attract buyers. Underpricing often does the opposite of what is intended. A price well below the market norm can make buyers question quality. Low prices also compress your margins, leaving you with no room to run promotions, cover returns, or weather a period of lower sales without losing money.

Not accounting for all costs. The full cost calculation above gets skipped, and then the owner discovers that what looked like a 40% margin is 15% once all the fees and costs are in.

Copying competitor prices without understanding their cost structure. A large brand with high volume and supplier agreements can sell profitably at a price that a smaller brand cannot match. Matching their price might mean selling at a loss.

Never revisiting pricing. Costs change. Supplier prices shift. Carrier rates increase. A price that was profitable in year one may not be profitable in year two. Review your pricing against your actual costs at least once a year.

How WEMASY supports your pricing setup

WEMASY's e-commerce system lets you set individual prices per product, apply sale prices with optional date ranges, and create bundles or multi-quantity discounts. You can also set different prices per variant (size, color, material) without needing to create separate product listings.

See what is included at WEMASY pricing.

Related reading: What is e-commerce? and How does an online store work?.

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