How to Price Your Products for Selling Online in South Africa

Pricing a product to sell online in South Africa is more than simply adding your chosen rand amount to what the item costs you. To price your products correctly, first calculate the cost price per item, then add a strategic markup that comfortably covers other additional charges and fees.

Depending on your setup, these extra costs may include local courier fees, payment gateway transaction costs, marketplace fees, and South African tax obligations. You also have to include other business expenses, such as staff, storage, packaging, and operational costs like Wi-Fi.

Working out how much of the total cost to assign to each product can be difficult, especially if you have a large product catalogue. That’s where this comprehensive guide comes in. You’ll learn how to calculate your true product costs, set profit margins, compare competitor prices, use psychological pricing, and factor in costs for free delivery and promotions.

What is the selling price?

Your selling price is the amount a customer pays for a product. It needs to be high enough to cover the relevant costs of selling that product, contribute towards other business expenses, and leave you with a profit.

It helps to understand a few basic pricing terms, including:

• Cost price: What you pay to make or purchase the product
• Selling price: What you charge your customer
• Profit: What remains after your relevant costs are deducted from the selling price
• Profit margin: Your profit expressed as a percentage of the selling price
• Markup: The percentage you add to your cost to arrive at a selling price

Markup and margin aren’t the same thing, so it’s important to distinguish between them when setting your prices. The markup tells you how much you should add to your cost to reach the selling price, while the profit margin tells you what percentage of the selling price remains after that cost is deducted.

Here’s a simple example: imagine an item costs R100, and you sell it for R150.

Profit: R50

Markup: R50 ÷ R100 = 50%

Margin: R50 ÷ R150 = 33.3%

Confusing the two can lead to underpricing; for instance, applying a 30% markup when you actually need a 30% profit margin means you will fall short of your financial goals. Use an online calculator to verify your profit margin and markup to ensure you meet your sales objectives.

How to price a product to sell online in South Africa

No single pricing formula works for every online store. Your pricing needs to reflect your products, costs, customers, and competitive environment. 

A practical approach is to calculate your true product cost, work out your target margin, account for online selling costs, and then compare your price with the market.

1. Start with your true product cost

Before deciding what to charge, work out what each product actually costs your business. Don’t look only at the amount you pay your supplier.

Depending on what you sell, your product cost may include:

• Purchase or production cost: What you pay to buy or manufacture the product
• Materials and labour: Particularly important if you make products yourself, such as clothing, furniture, artwork or other handmade goods
• Packaging: Product-specific packaging such as boxes, labels, mailers, and kraft paper
• Other per-unit costs: Any expense that goes into making, shipping, or selling a single product

You should also understand the difference between variable and fixed costs. Variable costs change according to how much you sell or produce. Examples include product materials, packaging, payment processing fees, and per-order fulfilment costs. 

Fixed costs generally stay the same. These can include rent, salaries, and recurring bills. You don’t need to add your entire monthly rent or subscriptions to the price of every product. Instead, your overall sales need to generate enough profit to contribute towards these costs.

2. Calculate your landed cost if you import products

When you import products for resale, your supplier’s price is only one part of your total product cost. The landed cost is the total cost of getting a product to the point where it’s ready to sell. 

Depending on your business, this may include the purchase price, international shipping, applicable customs duties, and other import-related costs, such as value-added tax (VAT).

A simple calculation is:

Landed cost = product cost + shipping and import costs + duties and applicable taxes

For example, imagine you buy a product for R200. Once you allocate R30 for international shipping and R20 for applicable import-related costs, your landed cost is R250.

If you base your selling price only on the original R200 purchase price, you could overestimate your profit because you wouldn’t account for that additional R50. Keep records of your import-related expenses so you can accurately calculate your true landed cost. 

Note: If you’re unsure about applicable duties or other charges, check the South African Revenue Service’s current duty and tax requirements rather than relying on your own estimates.

3. Choose the profit margin you want to achieve

Once you know your product cost, you can work out how much margin you want the sale to generate. One common mistake many businesses make is confusing markup with profit margin.

For example, if your true product cost is R100 and you add a 30% markup, your selling price is R130. That R30 difference represents a profit margin of about 23% of the R130 selling price.

If you want a 30% profit margin, you need a different calculation:

Selling price = total cost ÷ (1 − target profit margin)

So, if your total cost is R100 and your target margin is 30%:

R100 ÷ (1 − 0.30) = R142.86

In the calculation above, the profit is R42.86, which represents 30% of the selling price.

There’s no universal profit margin that every online seller should aim for. The right target depends on factors such as your product category, operating costs, competition, customer demand, sales volume, and business model (i.e., selling via online store vs. marketplace).

4. Factor value-added tax (VAT) into your selling price

If your store is registered for value-added tax (VAT), you also need to factor it into your pricing. Your customer-facing price will generally include VAT, so make sure the amount left after accounting for VAT still covers all your product and selling costs and target profit margin.

When comparing prices with competitors, check whether you’re comparing VAT-inclusive or VAT-exclusive prices. Build your pricing calculations around the amount your business retains after accounting for VAT, rather than treating the full customer payment as revenue available for costs and profit. Use a VAT calculator to help you add or remove VAT during your calculations.

5. Add the costs of selling online

Your product cost isn’t the only cost associated with making a sale. You can also incur costs when accepting payment, managing a store, fulfilling orders, and selling through marketplaces.

Consider costs such as:

• Payment fees: Payment providers may charge transaction or processing fees. These are typically a percentage of each sale, reducing the revenue you keep from each item.
• Platform/marketplace fees: If you sell through a marketplace or eCommerce platform, you may face commissions, subscriptions, or transaction-related charges.
• Packaging and fulfilment: Make sure you’re accounting for packaging and fulfilment costs that aren’t already included in your product cost.
• Returns and replacements: Some businesses also need to account for costs associated with online store returns, replacements, or failed deliveries.

The exact costs will vary depending on how and where you sell. The important point is to understand which costs apply to your business and account for them when assessing whether your selling price is profitable at your chosen selling price. 

6. Research what customers are willing to pay

Your costs tell you the minimum price you need to make the business commercially viable. They don’t necessarily tell you what customers will pay.

Customer willingness to pay can be influenced by:

• Product quality
• Brand reputation
• Design
• Convenience
• Product availability
• Customer experience
• The problem the product solves
• Alternatives available to the customer

For example, customers may be willing to pay more for a product that offers high-quality materials, a unique design, personalised service, or greater convenience. This doesn’t mean you should simply charge the highest price you think someone might accept. Instead, use your understanding of your target customer to assess whether your proposed price is realistic.

You can look at how customers respond after you launch. If a product attracts plenty of interest but has few sales, your price may be one factor worth investigating. If a product consistently sells out, you may need to review whether your pricing matches changes in demand.

7. Find out what competitors are charging

Competitor research can help you understand where your products sit in the market. However, don’t simply compare your price with the first or cheapest similar-looking product you find. 

Compare like-for-like products and consider the full offer.

Look at:

• Product specifications
• Size or quantity
• Materials and quality
• Brand
• Included extras
• Delivery costs
• Delivery speed
• Returns policy
• Customer service

For example, a competitor’s product may cost R50 less but charge significantly more for delivery to offset the low price. Another may include an accessory or offer a longer warranty.

The aim isn’t to match the lowest price. Competitor research gives you context for deciding whether your price is realistic and where you want your product to sit in the market.

8. Choose where your price sits in the market

Once you’ve considered your costs, customers and competitors, decide how you want to position your price. Your eCommerce pricing strategy in South Africa can take several approaches, including:

Competing on price

This approach can make sense when you’re selling highly comparable products and customers are particularly price-sensitive. However, competing primarily on price can pressure your margins, especially if larger retailers can buy stock at lower costs.

Pricing around the market average

A middle-of-the-market price can work when your product is broadly comparable with alternatives, and you compete through the overall customer experience, convenience or service.

Charging a premium

A higher price can make sense when your product provides additional value that customers recognise and are willing to pay for.

This could come from:

• Higher quality
• Design
• Exclusivity
• Brand
• Convenience
• Customer service
• Specialist expertise

The key is that customers should understand what justifies the higher price. Simply charging more doesn’t make a product more valuable.

9. Use psychological pricing without relying on it

Psychological pricing involves choosing prices that influence how customers perceive value.

A common example is pricing a product at R199.99, R199.98, orR199.97 instead of R200. Some research suggests that prices ending in 7, 8, or 9 can significantly affect consumer behaviour and purchasing decisions. These psychological pricing techniques can influence how customers perceive a price, but they shouldn’t replace proper pricing calculations.

Start by working out a price that covers your costs and supports your target margin. Then use psychological pricing to refine how you present that price. The approach should also fit your product and brand. A value-focused product may suit a price like R199, while a premium product may benefit from a simpler, rounded price. The goal isn’t to make every price end in 97, 98, or 99. It’s to choose a pricing presentation that makes sense for your customers.

10. Factor free shipping into your product pricing

Free shipping can attract customers, but it still costs your business money. If you want to offer free shipping, decide how you’ll absorb the cost. One option is to build some or all of the expected shipping cost into your product prices. This can work when delivery costs are fixed.

Another option is to set a free-shipping threshold, such as:

Free delivery on orders over R750.

This can encourage customers to increase their basket size without requiring every individual product to absorb the full cost of delivery. Your online store could also offer free shipping selectively for specific products, locations, campaigns, or order values.

When assessing a free-shipping offer, look beyond the product price. Consider:

Gross profit on the order – delivery and fulfilment costs

The right approach depends on your average order value, delivery costs, product margins, and what your customer expects.

11. Run promotions without losing money

Discounts can help attract new and returning customers, clear old stock, or increase sales, but a promotion shouldn’t automatically mean accepting an unprofitable price. Before running a campaign, know your minimum profitable price. If you’re offering a 20% off discount, make sure that the product’s new 80% price point can comfortably cover relevant product and selling costs.

You don’t always need to reduce the product price to create an attractive offer. 

Alternatives include:

• Bundle offers
• Buy-more-save-more promotions
• Free shipping above a certain order value
• Limited-time offers
• Gifts with purchase

These approaches can change the offer’s value without reducing your product price. If you regularly run promotions, consider whether your normal and promotional prices are sustainable.

12. Review your prices as your online store grows

Don’t set prices once and leave them unchanged. Costs, customers, and competitors can all change. A price that worked at launch may no longer be appropriate as the business grows.

Review your prices when:

• Supplier costs increase
• Shipping costs change
• Exchange rates affect imported products
• Payment or platform fees change
• A product consistently sells out
• A product isn’t selling
• Competitors change their prices
• Your sales volume changes
• You introduce a new sales channel
• You start offering free shipping or promotions

It can also help to track the numbers behind individual products, including:

• Selling price
• Total cost
• Gross profit
• Profit margin
• Units sold
• Discount rate
• Shipping cost
• Conversion rate

Regularly reviewing this information can help you identify products that are underpriced, over-discounted, or no longer profitable. The aim isn’t to change prices constantly. It’s to make sure your pricing continues to reflect your business economics and the market you’re selling in.

FAQs about how to calculate the price of a product

What profit margin should I aim for when selling online?

No single profit margin works for every online store. Your target should account for your product costs, operating expenses, payment and selling costs, competition, and the value customers place on your product. Calculate costs first, then set a margin that supports operations.

How do I factor shipping into my product price?

Charge customers separately for shipping, build some or all of the expected cost into your product price, or offer free shipping above a set order value. Compare average delivery costs with your margins and order values to determine which approach works for your business.

How do I compete on price with bigger online stores?

You don’t necessarily need to be cheaper. Retail pricing in South Africa can vary between large and small online stores, especially when bigger retailers may have purchasing advantages that make direct price competition difficult. Instead, consider where you can differentiate through quality, convenience, customer service, or other value that matters to your target customers.

Should I charge more than my competitors?

Charge more if there’s a clear reason for the difference that customers value. Higher-quality products, unique offerings, stronger service, convenience, or branding can support a higher price. First, compare your customer offer with competitors, not just the headline price.

Set a profitable price for your online products with Netcash

Pricing your products starts with understanding your costs, but it shouldn’t end there. Calculate your true product or landed cost, set a target profit margin, and account for the costs of accepting payments, fulfilling orders, and shipping. Then check what customers are willing to pay and where comparable products sit in the market.

As your online store grows, review your prices regularly and adjust them when your costs, customers or competitive environment change.

Once you’ve worked out sustainable prices, the next step is making it easy for customers to buy. With Netcash Shop, you can build your online store and give customers convenient ways to pay.