How To Price Products On Shopify: Complete Pricing Guide

Doubling cost or undercutting a competitor ignores the real question: what does it cost to deliver this product, and what is the customer willing to pay? A Shopify sale absorbs COGS, shipping, packaging, payment processing (~2.9% + a fixed fee), returns, ads/CAC, app and plan costs, and your time and profit.

Selling Price = Total Cost × (1 + Markup %). Safe and simple — guarantees you don't sell at a loss — but ignores the customer. Keystone (100% markup = 50% margin) is the classic version, often too low for DTC brands carrying ad costs. Use as a floor, not the final answer.

Track at least five competitors on price, shipping, and free-shipping threshold. Position below market (only with a real cost advantage), at market, or above market. Compare on the total landed price, not the sticker — $29 + $8 shipping is really a $37 product.

Charge for perceived value: brand, design, story, packaging, and experience. Works when your visuals, copy, and post-purchase journey match the price. Value-based pricing asks what the outcome is worth to the buyer — far more profitable than cost-plus for differentiated products.

Bundles raise AOV by pairing items at a small combined discount — you save on shipping and processing per order. Subscriptions create predictable recurring revenue and lift LTV dramatically; target LTV ≥ 3× CAC and watch monthly churn.

Markup is profit as a percentage of cost; margin is profit as a percentage of price. A 100% markup equals only a 50% margin. Confusing them quietly destroys profitability. Use margin to evaluate health, markup to set prices: Price = Cost ÷ (1 − Target Margin).

Physical/dropshipped: 40–60%+ gross. Handmade: 50%+ gross with labor priced in. POD: 20–40% net. Digital: 85–95%+ net. Know your number and price above it on purpose.

Physical product $39 sell, $15.72 total cost + $10 CAC → $13.28 net (34% margin). Handmade candle: include real labor; $39 covers materials, pays you, and clears overhead. POD t-shirt: price design, not blank fabric. Digital product: forget cost; price the transformation and use three tiers to capture budget and premium buyers.

Charm pricing ($39 vs $40) for value items; round numbers for premium. Anchor with a higher-priced option first. Use a decoy tier so the middle option becomes the best seller. Free-shipping threshold set just above AOV lifts cart size.

Forgetting payment processing, ignoring CAC, no returns reserve (especially apparel and POD), pricing too low out of fear, copying competitors blindly, and treating pricing as a launch decision instead of an ongoing discipline.