How to set your RRP: the pricing strategy that protects your margin

Setting your recommended retail price (RRP) might be the single most important decision you make in your e-commerce business. Get it wrong, and every sale costs you money. Get it right, and you have margin to invest in growth, ads, and yourself.

I built iland co. into a $1.3M fashion business and sold it in 2023. I went from $350K to $1.3M in 12 months. Pricing was a huge part of that. Most online store owners I work with are leaving 20% to 40% of their potential profit on the table because they set their RRP wrong from day one.

Here is how to actually find your recommended retail price, and the formula I wish someone had handed me when I started.

Quick answer: your recommended retail price should cover your fully-loaded cost per sale, not just your cost of goods, and then add a profit margin worth working for. For most fashion and lifestyle e-commerce brands, that lands around a 50% to 65% gross margin. Price on cost of goods alone and you will quietly lose money on a big share of your orders.

What is recommended retail price (RRP), really?

Your recommended retail price is the price you put on your product on your website. The price the customer sees. The price they pay before any discount codes, sale events, or shipping calculations.

In Australia, RRP is sometimes also called MSRP (manufacturer's suggested retail price). For e-commerce founders selling direct to consumer, it is simply: what you charge.

The job of your RRP is to cover all your costs, leave you a profit margin worth working for, and still feel fair to your customer. That sounds simple. It is not.

Why most e-commerce founders get RRP wrong

The mistake I see most often: founders calculate their RRP using cost of goods and a markup. They double the wholesale price and call it done. That is keystone pricing, and on its own, it is not enough.

Keystone pricing assumes your only cost is the product itself. But in 2026 e-commerce, the product is maybe 40% of your real cost per sale. The rest is hidden, and it eats your margin alive if you do not factor it in.

The hidden costs eating into your profit margin

When I run a pricing review with the founders I coach, this is the list we work through together. Almost no founder has all of these baked into their RRP from the start.

• Transaction fees. Stripe, PayPal, Shopify Payments all take roughly 1.7% to 2.9% per transaction. Afterpay and similar take up to 6% to 8% per sale.
• Shipping (especially “free shipping” promos). Free shipping is never free. You are absorbing that cost. Build it in.
• Discount codes. A welcome-list signup discount of 10% off the first order comes straight off your margin every time you acquire a new customer.
• Returns. Fashion returns can run 15% to 30% of orders. Return shipping, restocking, packaging that has to be replaced. Build for it.
• Meta and Google ad costs. I have spent up to $60 in Meta ads to acquire one customer. If that customer spends $40, you have just lost money.
• Email and SMS platform fees. Klaviyo, Postscript, your tech stack. These come off the top.
• Your time. The hours you spend packing, shipping, customer service, content. If you do not pay yourself, your business is subsidising itself.

Add all of those together. That is the real cost of every order. Your RRP has to cover it and still leave you a profit.

How to calculate your recommended retail price: the formula

This is the working formula I use with coaching clients. It is not the only way, but it is the one that protects your margin without overcomplicating things.

Start with your true cost of goods (COGS): the wholesale price, plus inbound shipping, plus duties, plus any packaging that goes with the product. Then add:

1. Transaction fees (estimate 5% to cover the average across processors)
2. Outbound shipping (use your average per-order shipping cost)
3. Marketing cost per acquisition (your customer acquisition cost from Meta and Google)
4. A returns buffer (start at 10% if you are unsure)
5. Your time, costed at a defensible hourly rate

That gives you your fully-loaded cost per sale. Now you set your retail price off that number. Not off what your competitors charge. Not off a guess. Off your actual cost.

For lifestyle and fashion e-commerce, I want you to multiply your COGS by four. So if your cost is $40, your RRP starts at $160. Anything less, you are running a charity.

The 4x rule matters even more if you plan to wholesale. Wholesalers buy at around half your RRP, so a 2x or 2.5x markup leaves you with nothing once a stockist takes their cut. Build the wholesale margin from day one, even if you are only selling direct right now.

What if 4x feels way too high? That is a manufacturing problem, not a pricing problem. Go back to your manufacturer and negotiate the cost down, or find a new one who can hit a price that lets you mark up properly. Do not shrink your margin to make the maths work. That decision will cost you for the life of the product.

Why a higher RRP usually beats a lower one

This is the part founders do not want to hear, so I will say it plainly.

A higher RRP gives you margin to advertise, margin to discount strategically, margin to invest in better photography, margin to pay yourself, and margin to ride out slow months.

A lower RRP gives you none of those things. You spend the same on Meta ads to acquire a $30 customer as you do a $200 customer. The $200 customer pays for the ads. The $30 customer cannot.

The most successful stores I have coached sell at $100+ price points. Higher price points mean higher AOV, higher margin, and a customer base who is not buying on price alone. Those customers also return less, complain less, and refer more.

When can (and can't) you raise your RRP later?

Here is the hard truth: once you have set your RRP, raising it is expensive. Existing customers anchor to the old price. Sale shoppers feel betrayed. Product page reviews reference the old price.

The clean times to raise RRP:

• When you genuinely change the product (new fabric, new design, added features)
• When you re-launch a product as a new SKU
• When you reposition the brand (new branding, new positioning, new audience)

The not-clean times:

• “Costs have gone up.” Customers do not care.
• “I undercharged at the start.” That is your problem to absorb until a relaunch.

Set the RRP right the first time. Or use a relaunch moment to reset.

Want to fix your pricing with me directly?

This is one of the first things I work on with every founder inside The 7-Figure Scale Collective. Pricing is the lever that changes everything else: ad spend you can afford, profit margin you can take home, growth you can actually fund.

If you want to walk through your numbers with me, The 7-Figure Scale Collective mastermind is where we do this work together.

FAQs about recommended retail price

• What is the difference between RRP and MSRP?
  RRP (recommended retail price) and MSRP (manufacturer's suggested retail price) are the same thing in practice. RRP is the more common term in Australia and the UK; MSRP is more common in the US.\
• How do I price a product for retail?
  Start with your fully-loaded cost per sale (your COGS plus transaction fees, shipping, marketing, a returns buffer and your time), then add your target profit margin. For most fashion and lifestyle e-commerce, a 50% to 65% gross margin is a sensible starting point.
• What costs should be included in a retail price?
  More than the product itself. A complete retail price covers your cost of goods, transaction and payment fees, outbound shipping, customer acquisition cost, a returns buffer, software and platform fees, and the value of your own time, with a profit margin on top.
• What profit margin should an e-commerce store aim for?
  It varies by category, but for fashion and lifestyle e-commerce a gross margin of 50% to 65% gives you enough room to advertise, discount strategically, cover returns and pay yourself. Margins much lower than that leave little to reinvest in growth.
• Can I price below my RRP?
  Yes. RRP is the price you set; you can run sales, discounts, and promotions below it. But every sale below RRP is eating your margin, so use sale pricing strategically.
• How often should I review my retail prices?
  Twice a year is a good rhythm. Major cost changes (supplier price rises, ad cost increases) warrant a mid-year review. Use a brand relaunch or new collection launch as the natural moment to reset prices upward.
• What is keystone pricing?
  Keystone pricing means doubling your wholesale cost to get your retail price. It is a starting point, not a finishing point. It does not account for transaction fees, marketing costs, returns, or your time, all of which need to be priced in on top.