Start from the margin you need
Start with the margin the product must produce, then work backwards to its price. Define the target clearly: for example, a 60% margin means the price must leave 60 cents from each dollar of delivered-order revenue after the costs included in your pricing model.
Build the full unit cost before setting that target. Include the garment or blank, decoration, inbound freight, duties, packaging, fulfilment, payment processing, and an allowance for return handling or other costs that occur when the order is sold. If advertising must be recovered by the product, include the planned ad cost per delivered order as well. Keep taxes and currency treatment consistent with the rest of your store’s reporting.
The formula is: price = full unit cost ÷ (1 − target margin). If a hoodie’s full unit cost is $28 and the target margin is 60%, the calculation is $28 ÷ 0.40 = $70. That is the required starting price before deciding how it should be displayed or tested. You can check each SKU with ORVX’s product pricing calculator.
Compare margin, markup and contribution profit
Margin and markup use the same gross profit but divide it by different numbers. Margin = (selling price − product cost) ÷ selling price. Markup = (selling price − product cost) ÷ product cost. If a hoodie costs $20 and sells for $50, gross profit is $30: margin is 60% ($30 ÷ $50), while markup is 150% ($30 ÷ $20). Use margin to check how much of each sales dollar remains after product cost. Use markup when converting a known landed cost into a proposed price, but do not treat a markup percentage as a margin percentage.
Contribution profit goes further by subtracting the variable costs of making and acquiring the sale. Contribution profit = realized revenue − product cost − advertising and any other variable selling costs you include. If that $50 hoodie costs $20 and takes $10 of advertising, contribution profit is $20, or 40% of revenue. Use contribution profit to decide whether a price works after customer acquisition, not just whether it looks profitable on the product page.
For a pricing decision, check margin against your product economics, markup against your cost-based price rule, and contribution profit against the actual sales channel. A price can meet a margin target yet leave too little contribution after ads. The product pricing calculator helps separate these calculations before you publish a price.
Worked example with sample numbers
This example is illustrative. It uses sample numbers for a streetwear store selling in the US. They are made up to show the method, they are not a benchmark, and your own figures will differ.
Formula: Net price needed = (variable costs + fixed fee) / (1 - target margin - percentage fee).
| Target margin | Net price needed | Check |
|---|---|---|
| 15.0% | $41.23 | $6.18 left per order |
| 25.0% | $46.98 | $11.75 left per order |
| 35.0% | $54.60 | $19.11 left per order |
| 45.0% | $65.17 | $29.32 left per order |
Run the same sum with your own numbers in the free calculator, or browse guides for sellers in the US and more streetwear guides.
General information only: tax, duty and import rules change and depend on your situation, so check with an accountant or the official source before acting.
Eligible Shopify stores can see these numbers for their own store through the Founding 10,000 offer.
Showing the price in the US
Show the streetwear product price as its own number, then keep sales tax, shipping, duties, payment fees and discounts separate. A $90 hoodie with a $10 discount should be analysed at its $80 selling price; payment processing and outbound shipping then reduce contribution, while sales tax collected is not product revenue. Use your checkout and tax settings to determine where tax applies. In South Dakota v. Wayfair, the Supreme Court upheld a law covering sellers that deliver more than $100,000 of goods or services into the state each year or make 200 or more separate transactions, and overruled the physical presence rule, according to the Legal Information Institute at Cornell Law School (Source: Legal Information Institute, Cornell Law School).
Treat duties as a separate landed-cost question, especially when importing. The White House states that, effective August 29, 2025, imported goods sent through means other than the international postal network, valued at or under $800 and otherwise eligible for de minimis, are subject to all applicable duties. U.S. Customs and Border Protection announced that suspension applies globally; the Federal Register later documented an indefinite suspension for non-postal modes. Confirm the applicable classification and charge before setting your displayed price. The product pricing calculator can model the price separately from these deductions (Source: The White House).
How to read the worked pricing example
Read the worked example from left to right. First, identify the target margin: this is the share of the selling price that must remain after the product cost. Next, locate the product cost input and any other costs included in the example. The calculation then works backwards from the target margin to produce the required selling price. The price is the output, not another assumption to add into the formula.
The final line tells you what the product needs to sell for under those stated inputs. It does not predict demand or prove that customers will accept the price. It shows the price required to meet the selected margin before costs excluded from the example are considered. If your garment cost, target margin or included costs change, the answer changes too. Use the product pricing calculator to run the same sequence with your own numbers, then compare the result with your actual product-level profitability rather than judging the price from revenue alone.
When a higher price is the wrong move
A higher price is the wrong move when the problem is margin leakage rather than the ticket price. Check the realized price after discounts, refunds and variable selling costs. For illustration only, a $100 product sold with a 20% discount realizes $80; raising its list price to $110 may add little if customers still receive the same discount. Use realized contribution and discount rate when promotions, returns or advertising are absorbing the apparent margin.
Conversion risk makes a price increase a test, not a correction. If sessions are steady but purchases fall after a price change, compare conversion rate, realized revenue and contribution per visitor before keeping it. For aging inventory, the relevant measure is sell-through and remaining stock value: a controlled markdown or bundle can be more appropriate than holding an elevated price while cash remains tied up.
Product role also changes the decision. An entry product may be intended to acquire customers, while a limited release may be designed for full-price contribution. Judge the former by customer acquisition and repeat profitability, and the latter by contribution and sell-through. Do not apply one price rule across a collection when each product serves a different job.
A pricing review routine
Run the same pricing review at a fixed interval and whenever a product, supplier, promotion or fulfilment cost changes. For each SKU, record product cost, listed price, realised selling price after discounts and refunds, sales-tax treatment, payment and platform fees, and contribution profit. Keep tax collected separate from revenue; use one consistent tax-inclusive or tax-exclusive basis when comparing products.
Calculate from delivered orders, not orders placed. For illustration only, a $100 hoodie sold with a $15 discount has a $85 realised price. If product cost is $32 and fees are $4, contribution before advertising is $49 ($85 − $32 − $4). If advertising attributed to the order is $12, contribution after advertising is $37. The first figure helps assess the offer and transaction economics; the second helps decide whether acquisition spending is supportable.
Review the same fields by SKU and collection, then record the decision: keep, test, reduce, or fix the economics. A product pricing calculator can check the arithmetic; your store data should determine the inputs.
Close by reinforcing that a US streetwear price should be judged against the profit the order actually contributes, not its sticker price alone, with tax treatment and the chosen pricing measure made explicit before changes are made.
Sources
- South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018) (Legal Information Institute, Cornell Law School, checked 26 October 2026).
- Fact sheet: suspending the de minimis exemption for commercial shipments globally (The White House, checked 26 October 2026).
- CBP ready to enforce end of de minimis loophole (U.S. Customs and Border Protection, checked 26 October 2026).
- Indefinite suspension of the de minimis exemption for merchandise arriving through all modes other than the international postal network (Federal Register, checked 2 November 2026).
- Adjusting imports of automobiles and automobile parts into the United States (Federal Register, checked 2 November 2026).
How this page was made: drafted with AI from a brief, then checked by automated rules for arithmetic, sources and duplication. The sample numbers were calculated, not reported.