How to Price Perfume for Resale: A Practical Guide for UK Retailers

A bottle that costs £15 and sells for £29.99 looks as though it makes £14.99. In practice, the amount left after VAT and direct selling costs can be far lower. Part of that price may be VAT that belongs to HMRC, and fees, postage, packaging and advertising all come out before anything is left over. Pricing well starts with knowing what each sale actually contributes.

This guide is for UK independent retailers, online sellers and marketplace traders pricing fragrance for resale. Mahsons Wholesale supplies fragrance to trade buyers, so we have a commercial interest in retailers buying stock to resell. The aim of this guide is to help you judge a product on its full economics, not on its wholesale price alone. It is general information, not tax, accounting or legal advice.

Start with the right question

The question many new retailers ask is "what markup should I use?" A more useful question is "what does this sale contribute once its direct costs are paid?"

Answering it means looking at seven things together:

• Landed cost: what the stock cost you to get in.
• VAT position: whether you are VAT registered, and how that changes the figures.
• Direct selling costs: fees, advertising, postage, packaging and losses.
• Contribution: what is left from each sale.
• Discounts: how promotions change that figure.
• Market price: what comparable sellers charge.
• Stock turn: how quickly the line sells.

There is no reliable universal markup or margin for perfume. Figures quoted online often describe brand or manufacturer economics, not resale, and rarely say which country, channel or costs they include. Your right price depends on your own costs, VAT position, channel and competition.

Markup and margin are not the same thing

Markup and margin both describe the same profit, measured against different figures. Markup compares profit with cost. Margin compares profit with the selling price.

Take a bottle that costs £20 and sells for £30 excluding VAT:

• Markup: (£30 − £20) ÷ £20 = 50%
• Gross margin: (£30 − £20) ÷ £30 = 33.3%

The £10 is the same; only the base changes. A 50% markup therefore produces a 33.3% margin, not a 50% margin. Confusing the two can lead to significant pricing errors: a retailer aiming for a "50% margin" who adds 50% to cost will fall well short.

Markup on cost	Gross margin on selling price
25%	20%
50%	33.3%
100%	50%

Start from landed cost

Price from what the stock actually cost you, not from the supplier's unit price. Landed cost is the cost of the goods plus the cost of getting them to you, such as inbound delivery, and any VAT you cannot recover, spread across the units in that order. If you import directly, duty and customs-related costs may apply too.

Our buying guide explains how to work out landed cost in more detail, so we will not repeat it here.

VAT: work on the right basis

VAT is where many pricing calculations go wrong, usually because VAT-inclusive and VAT-exclusive figures are mixed together. The right basis depends on whether you are VAT registered.

If you are VAT registered

When you sell standard-rated goods, part of the price your customer pays is output VAT. You account for it to HMRC; it is not your revenue and it is not your profit. For a VAT-registered retailer assessing the underlying economics of a standard-rated sale, it is generally clearer to work with revenue and margin excluding output VAT.

To remove standard-rate VAT (currently 20%) from a VAT-inclusive price, GOV.UK's method is to divide by 1.2. So:

• £29.99 ÷ 1.2 ≈ £24.99 excluding VAT
• the VAT element is therefore about £5.00

It is not £29.99 minus 20%. That gives £23.99, which understates your revenue by about £1 per sale. The VAT inside a VAT-inclusive price is one-sixth of it, not a fifth.

On the cost side, VAT-registered businesses can usually reclaim VAT on business purchases, provided the rules are met and they hold valid VAT invoices. That is why, for a registered retailer, costs are usually best considered net of any VAT that can genuinely be recovered. Not every cost carries VAT, however, and not all input VAT is recoverable, so check the treatment of each cost rather than assuming.

If you are not VAT registered

A business that is not VAT registered does not charge VAT on its sales. The whole price the customer pays is its revenue.

Equally, it cannot reclaim VAT. Any VAT it pays to suppliers, platforms, carriers or advertisers is simply part of its costs. That is why a non-registered retailer should not copy a VAT-registered retailer's calculation, or the other way round: the same shelf price produces different economics.

Special schemes and the registration threshold

Special VAT accounting schemes can change the calculation. For example, businesses on the Flat Rate Scheme generally cannot reclaim VAT on purchases, apart from certain capital assets. If you use a special scheme, ask your accountant how to treat VAT in your pricing.

Registration becomes compulsory if your VAT-taxable turnover for the last 12 months goes over £90,000, or you expect it to go over £90,000 in the next 30 days alone. If your turnover is approaching that level, review your prices with an adviser before you register, because the same selling price will produce a different result afterwards.

Add the cost of selling

Once you know your landed cost and VAT position, add every cost that a sale creates:

• Platform or marketplace fees. Check what the fee is calculated on. Some platforms charge a percentage of the total the buyer pays, which can include postage and VAT, not just the item price. Fee rates can also change, or vary with seller performance.
• Payment processing on your own website.
• Advertising and promoted listings. Whether you pay per click, per sale or up front, convert it into a cost per order.
• Outbound postage. Perfume is subject to carrier restrictions, which can limit the services you can use and affect what postage costs.
• Packaging.
• Discounts and vouchers.
• Returns, damage and losses. Base these on your own records. Rather than adding an arbitrary percentage, review what returns, damage and loss have actually cost you, and take that into account in your planning.

Check your current fee schedule for every channel you use, and update your figures when fees change. VAT treatment also differs between costs, so for a registered business, check which of these carry VAT that you can recover.

How channels differ

Your own website. Payment fees, advertising, postage and packaging are the main costs per order. Platform subscriptions and apps are usually overheads rather than per-order costs.

Marketplaces. Selling fees, promoted listings and postage tend to dominate, and shoppers can compare the exact same product across many sellers.

Physical retail. Card fees apply per transaction, testers use up stock, and damage and shrinkage are real costs. Rent, rates and wages are overheads that total contribution has to cover.

Three worked examples

The examples below use one hypothetical bottle bought at £15.00 excluding VAT, with £0.50 of inbound delivery allocated to it. Fee rates are placeholders. Replace every figure with your own.

Example A: VAT-registered retailer, own website

ILLUSTRATIVE EXAMPLE — NOT A RECOMMENDED SELLING PRICE. All figures are hypothetical.

	£
Customer pays, including VAT and free delivery	29.99
Less output VAT (£29.99 ÷ 1.2)	−5.00
Revenue ex VAT	24.99
Landed cost (VAT recovered)	−15.50
Gross product profit (38.0% gross margin)	9.49
Payment fee (illustrative 2% + 20p)	−0.80
Postage	−3.50
Packaging	−0.40
Advertising, per order	−1.50
Contribution after direct selling costs	3.29

The "£14.99 profit" from the opening is actually £3.29 of contribution, about 13% of revenue excluding VAT.

Example B: VAT-registered retailer, marketplace

ILLUSTRATIVE EXAMPLE — NOT A RECOMMENDED SELLING PRICE. All figures, including fee rates, are hypothetical.

	£
Customer pays, including VAT and postage	29.99
Revenue ex VAT	24.99
Landed cost (VAT recovered)	−15.50
Gross product profit	9.49
Marketplace fee (illustrative 12% of the VAT-inclusive total + 40p)	−4.00
Promoted listing (illustrative 5%)	−1.50
Postage	−3.50
Packaging	−0.40
Contribution after direct selling costs	0.09

At the same price, the marketplace sale contributes almost nothing. A single return or a small discount would turn it into a loss. Real fees and fee bases vary by platform, category and account, so substitute your current figures.

In our own trading, we have seen products that looked comfortably profitable on buy price and selling price alone, until postage, promoted listings and packaging were added. Working through the full cost of each sale is now part of how we assess any line.

Example C: retailer not registered for VAT, own website

ILLUSTRATIVE EXAMPLE — NOT A RECOMMENDED SELLING PRICE. All figures are hypothetical.

	£
Customer pays (no VAT charged)	29.99
Revenue	29.99
Landed cost, including £3.10 of VAT that cannot be reclaimed	−18.60
Gross product profit	11.39
Payment fee (illustrative 2% + 20p)	−0.80
Postage	−3.50
Packaging, including VAT	−0.48
Advertising, including VAT where charged	−1.80
Contribution after direct selling costs	4.81

The shelf price is the same as Example A, but the result differs because VAT is treated differently on both sides of the sale. This does not make one position better than the other: registration is a legal requirement above the threshold, and businesses register voluntarily for their own reasons. It shows why you should build your prices on your own VAT position.

Your break-even price

Your break-even selling price is the point at which the revenue left after VAT treatment and direct selling costs covers the landed cost, but leaves no contribution towards overheads or profit.

In Example A, each £1 taken off the VAT-inclusive price removes about 83p of revenue excluding VAT and saves about 2p in payment fees, so contribution falls by roughly 81p. With £3.29 of contribution to lose, break-even is at roughly £25.95. Example B is already at break-even, and Example C reaches it at roughly £25.10.

Break-even is a floor, not a target. Contribution from each sale has to pay for your overheads, such as software, insurance, rent, wages and professional fees, before your business makes a profit, and tax applies to that profit where relevant. That is why we avoid calling a single product's contribution "net profit".

Discounts and free delivery

A modest discount can remove a large share of contribution, because your costs stay the same while your revenue falls. In Example A, a 10% discount code takes the price to £26.99. Revenue excluding VAT falls to about £22.49, and contribution drops from £3.29 to about £0.85.

The effect will differ with your own figures, but the principle holds: understand your price floor before you run a promotion. Treat full price, planned promotions and clearance as distinct decisions, and know which one you are making.

"Free delivery" is never free to the retailer. If postage is included in the price, it is still a cost of the sale, and on some marketplaces it may also increase the amount your fees are calculated on.

Discounts should be genuine. Consumer protection law restricts misleading price comparisons, so any "was" price or saving you advertise should be real, not created by raising a price first.

Competitor prices and RRP

Competitor prices are inputs, not instructions. Before reacting to a lower price, make sure you are comparing like for like:

• the same product and size;
• the same concentration or version;
• the same condition, such as boxed, sealed or tester;
• delivery included or excluded.

Then compare that price with your own commercially viable price. Matching a competitor who has a different VAT position, fee structure or cost base can leave you selling at a loss. If a line cannot be sold profitably at the prevailing market price, the better decision may be not to stock it.

Set your prices independently. UK competition guidance is clear that competing sellers must not agree prices, or agree not to undercut each other, and must not discuss pricing strategies with competitors. Repricing tools are fine when used independently.

A recommended retail price (RRP) can be a useful reference point for where a product sits in the market. It is a recommendation, not an obligation. The Competition and Markets Authority says resellers are entitled to set their own prices, and suppliers are not usually allowed to dictate them. Actual market prices often differ from RRP, sometimes significantly.

Contribution and stock turn

A strong contribution on paper is only useful if the stock sells. Consider two illustrative lines. Product A contributes £2 per sale and sells twelve a month, producing £24. Product B contributes £6 per sale but sells two a month, producing £12, while tying up more cash for longer.

A higher headline margin is not automatically the better commercial choice. Our range-building guide covers balancing contribution and stock turn across your range in more depth.

In our experience, a lower contribution per unit can sometimes make commercial sense when a line sells reliably and can be reordered with confidence. A higher headline margin is not automatically better if the stock sits for a long time.

Perfume resale pricing checklist

A prompt for judgement, not a scoring system.

Before pricing

• What did this stock actually cost me, including inbound delivery?
• What is my VAT position, and does a special scheme apply?
• Which channel am I selling through?

Cost to sell

• Which fees apply, and what are they calculated on?
• What does postage cost for this item?
• What does packaging cost?
• Am I allocating advertising to each order?
• What have returns, damage and losses cost me in the past?

Market

• Am I comparing like-for-like competitor listings?
• Is there an RRP, and how far is the market from it?
• Can I sell above my break-even price at the prevailing market price?

After launch

• What contribution is the line actually producing?
• How often am I discounting it?
• How quickly is it selling?
• Should I reorder, reprice or exit?

Frequently asked questions

What profit margin should I make on perfume?

There is no reliable universal figure. The right margin depends on your costs, VAT position, channel, competition and how quickly the line sells. Work out the contribution each sale makes after direct costs, and make sure your total contribution covers your overheads.

What's the difference between markup and margin?

Markup is profit as a percentage of cost; margin is profit as a percentage of the selling price. A 50% markup equals a 33.3% margin.

How do I calculate a selling price including VAT?

If you are VAT registered and the goods are standard-rated, multiply the price excluding VAT by 1.2. To remove VAT from a VAT-inclusive price, divide by 1.2. If you are not VAT registered, you do not charge VAT.

Should I include postage in my price?

You can build it into the price or charge it separately, but either way it is a cost of the sale. Check whether your platform's fees are calculated on postage too.

Should I price below competitors?

Only if you remain above your own break-even price and still earn a worthwhile contribution. Compare like for like, and never agree prices with competitors.

Do I have to sell at RRP?

No. RRP is a recommendation. Resellers are entitled to set their own prices.

How do I work out my break-even price?

Find the price at which revenue, after VAT treatment and direct selling costs, just covers your landed cost. The worked examples above show how.

About Mahsons Wholesale

Mahsons Wholesale supplies genuine branded and Arabian fragrances to UK trade buyers, sourced through established distributors and suppliers. Trade prices are shown excluding VAT, with VAT added at checkout, and you can mix and match across the catalogue to reach the £100 ex VAT minimum order. No trade account is needed, and we deliver within the UK.

Browse current trade prices in the Wholesale Catalogue