How to Price Products for an Online Store

A pricing method built from the costs that actually reach your bank account — including the two most stores leave out, and why shipping cost belongs on the product page.

Most pricing advice starts with your cost and applies a multiplier. That method quietly ignores the two largest costs in e-commerce — customer acquisition and returns — which is why stores using it are often surprised to be unprofitable at healthy-looking margins.

Here is a method that starts from what actually reaches your bank account.

Key Takeaways

• Price against the full stack, not the product cost. Six lines sit between the sale and your bank.
• Returns are a pricing input. 19.3% of online sales came back in 2025 (National Retail Federation, retrieved 2026-08-19).
• Show shipping cost early. Extra costs appearing late is the top stated reason for checkout abandonment at 40% (Baymard Institute, retrieved 2026-08-19).
• Free shipping is a pricing decision, not a marketing one — about half of shoppers will not pay anything for shipping (McKinsey, retrieved 2026-08-19).

Start From the Full Cost Stack

Six lines sit between a sale and money in your account. Most pricing methods count two.

The last two are where pricing methods break. A 70% gross margin sounds comfortable and can still end in a loss once acquisition cost and returns are applied — our fulfilment model guide works that through on 100 orders.

So the first step is not choosing a multiplier. It is knowing your acquisition cost and your return rate. Until you do, any price is a guess.

Build the Price

1. Total your unit costs — product plus shipping.
2. Add processing and platform fees as a percentage of the sale price.
3. Add your acquisition cost per order. Not per click. Per order that actually completes.
4. Add a returns provision. Multiply your category’s return rate by what a return actually costs you. If you cannot recover the unit, that is close to the full unit cost.
5. Add the margin you need to pay yourself and reinvest.
6. Sanity-check against the market. If the result is far above what comparable products sell for, your problem is upstream — costs, category, or acquisition — and no pricing tactic fixes it.

Step 4 catches the most people. A store selling apparel at a 30% return rate, unable to resell returns, is losing close to a third of gross margin before anything else.

Why Shipping Cost Belongs on the Product Page

This is a pricing decision with an unusually clear evidence base.

Average documented cart abandonment is 70.22%, calculated across 50 studies spanning 2006 to 2025. Setting aside people who were only browsing, the top stated reason is extra costs too high at 40%, and couldn’t see or calculate total cost upfront appears separately at 12%.

Meanwhile, more than 90% of shoppers say they would likely abandon a purchase once they saw high shipping costs, and about half say they are unwilling to pay anything for shipping at any speed.

Two conclusions follow.

First, surprise is worse than cost. A shipping fee revealed at checkout converts far worse than the same fee shown on the product page. Show it early.

Second, free shipping is really a pricing decision. If half your buyers will not pay for shipping, building it into the product price and calling it free is often the higher-converting arrangement — provided you built it in rather than absorbing it.

See checkout and payment routing and continuous conversion optimisation.

What About Delivery Speed?

Related, and commonly overpriced.

Delivery speed has fallen from the top consumer priority in 2022 to fifth place, with cost now ranking first. 90% of shoppers will wait two or three days if waiting saves them a fee, and buyers say they would rather wait a week for a delivery that arrives on time than get one that arrives later than promised.

The pricing implication: paying to make delivery faster is often worth less than making it cheaper and more predictable. Publish a conservative window and hit it.

Common Pricing Mistakes

Cost-plus with a fixed multiplier. Ignores acquisition cost, which is usually the largest line and varies wildly by category.

Pricing against a competitor whose costs you do not know. They may have better unit economics, an owned audience, or be losing money.

Treating returns as an operational cost. They are a pricing input. Model them per category.

Discounting to fix a demand problem. If people are not buying at your price, discounting trains them to wait for the next discount. Check whether the actual problem is your product page, your shipping presentation, or your traffic quality.

Charging shipping separately to look cheaper. The headline price looks better and the checkout converts worse.

Never revisiting. Supplier costs, ad costs, and return rates all move. Prices set once are wrong within a year.

Raising Prices Without Losing Customers

• Change the offer, not just the number. A bundle, a better guarantee, faster delivery.
• Move in steps, and watch conversion rather than revenue alone.
• Raise on new products first, where there is no anchor to violate.
• Give existing customers notice. Silent increases cost trust disproportionately.
• Check your margin before discounting. If your returns provision is honest, you may have less discounting room than you assume.

Frequently Asked Questions

What is a good profit margin for an online store?

Any single number would mislead, because acquisition cost and return rate vary enormously by category. What matters is whether the price covers all six lines above and still leaves you a margin — a healthy gross margin can end in a net loss.

Should I offer free shipping?

Usually build it into the price rather than charge separately. About half of shoppers say they will not pay anything for shipping at any speed, and extra costs appearing late is the top stated reason for checkout abandonment.

How do I calculate my customer acquisition cost?

Total advertising spend divided by orders acquired, not clicks. Measure it per product category, because it varies widely.

How much should I mark up a dropshipped product?

Enough to cover shipping, processing, platform fees, advertising, and a returns provision — then your margin. Because returns are usually unrecoverable in dropshipping, that provision is larger than for a stockholding retailer. See how to start a dropshipping business.

When should I change prices?

At least annually, and whenever supplier costs, advertising costs, or return rates move materially. Prices set once and forgotten drift out of alignment within a year.

Sources

• National Retail Federation with Happy Returns, 2025 Retail Returns Landscape — 19.3% online return rate, 82% rate free returns important. Retrieved 2026-08-19.
• Baymard Institute — 70.22% average cart abandonment across 50 studies (2006–2025); extra costs too high 40%, could not calculate total cost upfront 12%. Retrieved 2026-08-19.
• McKinsey & Company — cost ranked first, speed fifth; over 90% would abandon on high shipping costs; about 50% unwilling to pay anything for shipping; 90% will wait two to three days to avoid a fee. Retrieved 2026-08-19.