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My supplier raised prices by 10%; how much does my margin drop if I keep my selling price?

Enter the new cost with the same selling price and compare the margin with the old one. On a product costing 60 and selling for 100, a 10% supplier increase drops the margin from 40% to 34% and takes 15% of the profit per unit. To get the same margin back, your price has to rise by the same percentage, 10%.

Published · 3 min read

The effect in numbers

You sell a box of premium dates that costs 60 at a price of 100. The supplier tells you the new price is 66. In the Profit margin calculator:

Worked example

Before the rise (cost 60, price 100): profit 40, margin 40%.

After the rise at the same price (cost 66, price 100): profit 34, margin 34%.

The extra 6 came entirely out of your profit. It is 10% of the cost but 15% of the profit. The thinner your margin, the harder a supplier increase hits: on a product with a 10% margin, a 10% cost rise eats most of the profit.

Three pricing options

  • Keep the price at 100: margin 34%, profit 34. Fair if you fear losing price-sensitive customers, but know you are giving up 6 on every unit.
  • Raise the price to 106 to keep the same profit per unit: profit 40 as before, but the margin is 37.74% because the price is higher.
  • Raise the price to 110, 10% like the cost: margin 40% as before, and profit 44.

Note the rule: if cost rises by some percentage and you raise the price by the same percentage, the margin stays exactly where it was, and profit per unit rises by that percentage too.

Which option should you pick?

There is no single answer. The calculator prices each option precisely; the decision depends on your competitors and customers. Some useful questions:

  1. Did the supplier raise prices for everyone? If it is a market-wide increase, your competitors will probably raise theirs too.
  2. Is there an alternative supplier? Enter their price in the calculator and compare the margin, counting shipping from them.
  3. Can you raise the price in steps? For example, to 106 now and review in a month.
  4. Can you recover part of the rise elsewhere, such as cheaper packaging of the same quality?

If you sell through a marketplace that takes commission

If the marketplace takes a percentage of the price, raising the price raises the commission too, so you need a slightly bigger increase to restore the margin. Enter the new cost, the commission rate and your target margin in the Selling-price calculator for the exact price, then check the result here.

Common questions

The supplier only raised prices 5%. Is it worth checking?

Yes. If you keep your price, the hit to profit is always bigger than 5%, and bigger still the thinner your margin.

Should I update the cost in all my calculations straight away?

Update it from the first batch you buy at the new price. Stock you bought at the old price keeps its old cost.