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United States market

# Work Back from the Selling Price You Expect to Realize, Not the Price on the Box

An expected markdown lowers the maximum buying cost compatible with a target gross margin, even when the advertised retail price stays the same.

Working backward from retail price is useful only if the starting price is one you expect to collect. A cooking robot positioned at an attractive list price may sell through promotions. Using the list price to set the sourcing budget spends margin that the discount will later remove.

## Margin is a share of sales revenue

For a chosen gross-margin target, the maximum landed inventory cost is the realized selling price multiplied by the share left after that margin. The denominator is sales revenue, not product cost. Adding a markup to the supplier’s price answers a different question.

Use the selling price after the planned discount and exclude tax collected on behalf of a tax authority. This is a gross-margin calculation: the gross profit still has to fund selling expenses and overhead. It is not a promise of net profit, and the margin target must come from your own business economics.

## A promotion reduces the buying ceiling

**Hypothetical example — figures illustrate the calculation only; they are not our quotation or market prices.**

Assume a list price of $400, an expected promotional discount of 10%, and a target gross margin of 35%. These are planning assumptions, not recommended pricing or margin levels. Ignore returns and use prices before sales tax.

At the list price, the maximum landed inventory cost would be $400 × 65% = $260. But the expected selling price is $360. Applying the same target to that price lowers the cost ceiling to $234.

Buying at $260 and selling at $360 leaves $100 of gross profit, or about 27.8% of sales. The gross margin does not remain at 35% merely because the advertised price is still $400. The discount reduced the revenue base without reducing the cost already committed.

A supplier quote below $234 is not automatically affordable either: the ceiling is for the landed inventory cost, so any additional cost required to get the unit into sellable stock must fit inside it.

Replace list price with the expected realized price in your reverse-margin calculation, then use the resulting landed-cost ceiling to evaluate the supplier quote.

## Related procurement information

- [Calculate landed cost](https://www.kanench.com/resources/cooking-robot-import-landed-cost/)
- [Compare consignment and wholesale](https://www.kanench.com/resources/cooking-robot-consignment-or-wholesale/)
- [Discuss an OEM target-cost brief](https://www.kanench.com/oem-odm/)

Share the target channel, net retail range, quantity and destination to discuss product scope against a realistic purchase budget.

[Discuss a target-cost brief](https://www.kanench.com/contact/)