When a new product is introduced to a store, the recommended retail price (RRP) provides an initial point of comparison. It allows you to quickly check whether the product can fit into the range, at what price level it can be offered, and whether the resulting margin is compatible with the company's costs.
It does not replace the retailer's own calculations. A physical store, an e-commerce site, and a specialist store with an extensive advisory service all have different costs. The right selling price must therefore be based on your own business structure.
The product's purchase price is only one part of the calculation. Depending on your business, you must also take into account transport, payment fees, packaging, costs related to the premises or website, any advertising costs, and the portion of fixed costs that each sale must help cover.
To properly analyze profitability, compare the amounts on a consistent basis: pre-tax purchase price and pre-tax selling price. VAT collected is not a margin. However, the price including VAT remains the price visible to the final customer.
To quickly test several scenarios, use our margin calculator. It allows you to check the effect of a selling price on the margin before applying it in store.
The gross margin is the difference between the pre-tax selling price and the pre-tax purchase cost. The margin rate expresses this margin as a percentage of the pre-tax purchase cost, while the markup rate expresses the margin as a percentage of the pre-tax selling price. These two percentages therefore answer different questions and should not be confused.
The multiplier can be used as a shortcut for setting a price, but it does not replace the monitoring of the actual margin. Two products using the same multiplier can produce different results once costs, applicable VAT, and marketing costs are factored in.
The recommended price can be kept, increased, or decreased depending on your business model. A store may choose a different price if it offers an extensive advisory service, incurs higher local costs, sells mainly online, or builds a more premium positioning.
Conversely, a one-off promotion may reduce the margin on a product to boost sales in a department or clear stock. Before any discount, always check the actual cost of the product and the impact of the reduction on your profitability.
Esotericæ communicates its RRPs as a reference point. We do not impose a fixed or minimum resale price. The retailer is free to decide the price applied to its customers and remains responsible for its commercial policy.
European competition rules distinguish between a recommended price and an imposed resale price: a price presented as recommended must not become mandatory through pressure or measures intended to enforce compliance.
Selling at a loss is governed by Article L442-5 of the French Commercial Code. The text targets the resale of a product in its current state at a price lower than its actual purchase price and provides for several exceptions depending on the situation. Before a clearance operation or a large discount, it is therefore useful to check the framework applicable to your case.
You can consult the text currently in force directly on Légifrance.
Use it as a starting point: start with the recommended price, calculate your actual margin, add your own costs, and then adjust the price according to your customer base and positioning. This method makes it possible to maintain a commercially coherent price without losing sight of the store's profitability.
To go further, the Esotericæ margin calculator allows you to compare several scenarios before setting your final price.