By Paul Vizzio
One of the most common mistakes in hardware is pricing a product by adding a small markup to manufacturing cost and assuming the difference is profit.
In reality, the cost to make a product is only one part of the equation. A product still needs to be sold, marketed, discounted, fulfilled, and supported. If you ignore those layers, a product that looks profitable on paper can quickly become unprofitable in the real world.
In this post, I want to walk through real numbers from the RemieDog Sutton Slide Leash to show how this actually works.
The goal here is not to claim that every hardware product must follow one exact pricing formula. It is to show why simple markups like “cost plus 10%” usually do not work, why different sales channels produce very different economics, and why if a product cannot support a realistic selling price, the issue is often the product cost structure and not the rule of thumb.
Base Economics
For this example, we’ll use the Sutton Slide Leash:
- Retail price: $45.00
- Landed cost: $13.40
In this case, landed cost means the full ready-to-sell product cost: product cost, inbound freight, tariffs, packaging, and everything required to get the product into inventory ready for sale.
So before any selling costs, that leaves:
$45.00 - $13.40 = $31.60
At first glance, that can look like a large margin. The issue is that this number exists before you actually sell the product.
Why Small Markups Fail
Let’s use a simple example. If a product costs $13.40 landed and you add just 10%, the selling price would be:
$13.40 × 1.10 = $14.74
That leaves:
$14.74 - $13.40 = $1.34
That $1.34 would have to cover payment fees, discounts, affiliate payouts, customer acquisition, tooling recovery, patents, software, and actual profit.
That is not a business. That is just an arithmetic exercise.
Where Can You Actually Sell a Product?
Once a product is made, you still need to sell it. For a product like the Sutton Slide Leash, the main paths are:
- Direct-to-consumer through your own website
- Amazon, because many customers prefer buying through Prime and already trust the platform
- Retail / wholesale, if the long-term goal is to get into pet stores, Chewy, and similar channels
The product itself does not change, but how much money you keep per unit changes significantly depending on the path.
That is why pricing cannot be based only on product cost. It has to account for how the product will actually be sold.
How the Math Works
To keep the comparisons consistent, the math in the chart below follows the same sequence for each channel:
- Start with the selling price
- Subtract selling costs specific to that path
- Subtract landed product cost
- Subtract customer acquisition cost (CAC)
- Subtract fixed business costs allocated per unit
That final number is what is actually left as profit per unit.
For this analysis, we assume a $10 CAC. This is not a fixed number. It changes over time based on the marketing mix and how efficiently the brand is acquiring customers. For RemieDog, CAC comes from a mix of organic traffic like SEO and word of mouth, along with paid acquisition like Instagram ads. Sometimes it is lower, and sometimes it is significantly higher. The point is not that $10 is universally correct. The point is that customer acquisition is a real cost that has to be covered.
We also allocate $11 per unit for fixed costs not included in landed cost. This is a simplified way to represent expenses like tooling recovery, patent filings, Shopify and other software subscriptions, and other business overhead. In reality, that number changes with volume, but it helps show why the gap between product cost and retail price is not “all profit.”
Profit by Sales Path
| Scenario | Price | Selling Costs | After Fees | Landed Cost | After Product Cost | After CAC ($10) | After Fixed ($11) | Final Profit |
|---|---|---|---|---|---|---|---|---|
| Website Full Price | $45.00 | $1.61 (Shopify) | $43.39 | $13.40 | $29.99 | $19.99 | $8.99 | $8.99 |
| Website 10% Sale | $40.50 | $1.47 (Shopify) | $39.03 | $13.40 | $25.63 | $15.63 | $4.63 | $4.63 |
| Affiliate (10% off + 10%) | $40.50 | $1.47 (Shopify) + $4.05 (Affiliate payout) | $34.98 | $13.40 | $21.58 | $11.58 | $0.58 | $0.58 |
| Amazon FBA | $45.00 | $6.75 (Amazon referral fee) + $4.75 (FBA fee) | $33.50 | $13.40 | $20.10 | $10.10 | -$0.90 | -$0.90 |
| Wholesale | $22.50 | — | $22.50 | $13.40 | $9.10 | $9.10 | -$1.90 | -$1.90 |
A few things become clear immediately.
- Selling on your own website at full price is the healthiest path
- Sales and affiliate payouts compress profit very quickly
- Amazon removes a meaningful amount per unit before ads
- Wholesale can be strategically useful, but there is much less room left per unit
More importantly, this shows why the gap between product cost and retail price is not just “profit.” It is the pool of money required to actually sell the product.
A Quick Note on Affiliate Sales
In the chart above, affiliate means a creator, influencer, or partner sharing a product link or promo code in exchange for a commission.
In this example, the affiliate path assumes:
- A 10% discount for the customer
- A 10% payout to the affiliate
This is a good example of why small-seeming promotional programs can have an outsized effect on economics. A customer discount and an affiliate payout can each feel manageable on their own, but together they cut deeply into what is left per sale.
Why Wholesale Still Matters Even If You Start DTC
Even if the initial plan is to sell direct-to-consumer only, it is still useful to understand what happens if you ever want to move into retail.
In many retail situations, the store needs enough room to roughly double its money on the shelf. That usually means the brand is selling the product at about half of MSRP.
For a $45 product, that means a wholesale price around $22.50.
That does not mean every hardware product must be sold wholesale. It means pricing too low early on can close off that option later.
What If the Product Still Doesn't Work Financially?
This is where design for manufacturing becomes critical.
If a product cannot support a realistic selling price once you include selling costs, customer acquisition, and business overhead, the answer is not always to argue with the pricing rule. Often the answer is to lower the cost of the product itself.
That can mean:
- Reducing part count
- Simplifying geometry
- Choosing a more appropriate manufacturing process
- Reducing assembly labor
- Redesigning the product around production realities instead of prototype convenience
We go through that process in more detail here: How To: Cost Down a Mechanical Design
If your product only works economically when you pretend discounts, selling costs, and customer acquisition do not exist, the problem is usually not the pricing rule. It is the cost structure of the product.
Why the 4x Rule Exists
A common rule of thumb in hardware is that a product should retail for around 4x its landed cost.
That is not because every founder is trying to maximize profit. It is because the cost to make a product is only one part of what the selling price has to support.
The 4x rule is not a law, and not every product lands there exactly. But once you start layering in platform fees, discounts, affiliate payouts, customer acquisition, tooling, patents, and business overhead, it becomes much easier to understand why a large gap between landed cost and retail price is often necessary.
Takeaway
Pricing is not about how much you make on a unit.
It is about whether the entire system around that unit works.
A product that looks profitable on paper can quickly become break-even or negative once real-world costs are applied. The goal is not just to design something that can be made. It is to design something that can be made, sold, and supported sustainably.
You can see the Sutton Slide Leash here: RemieDog Sutton Slide Leash
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