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Product Cost: $60 (30% of retail)

For a manufactured home product (electronics, outdoor gear, home essentials), 25-35% of retail price as COGS is standard. This covers raw materials, manufacturing, and basic packaging. It does NOT include freight, duties, or landed cost additions, which typically add another 20-30%.

Retailer Margin: 50% ($100)

This is the single biggest variable and the one most likely to be challenged. 50% is standard for mass retail and department stores (Walmart general merchandise, Target home, Bed Bath). It is NOT standard for all retailers. Costco takes ~14%. Home Depot takes 33-35% on hardlines. Best Buy varies by category. The $200 to $5 scenario specifically models mass retail at 50%. Different channels produce very different outcomes.

Promo Reserve: $9.80 (4.9% of retail)

Retailers require brands to fund promotional activity. This is money set aside for markdowns, circular features, seasonal promotions, and end-cap displays. It's typically deducted from invoices, not paid separately. New brands with less leverage fund more. Established brands negotiate this down.

Co-op Advertising: $7.50 (3.75% of retail)

Cooperative advertising fees fund the retailer's marketing that features your product. Flyers, digital ads, in-store signage. Some retailers call this Marketing Development Funds (MDF). Home Depot is particularly aggressive with MDF requirements for endcaps and displays.

Slotting Fees: $5.80 (2.9% of retail)

The cost of getting shelf space. Some retailers charge per-SKU slotting fees upfront. Others fold it into ongoing deductions. Costco does NOT charge slotting fees. Mass retail and grocery channels commonly do. The amount varies wildly by retailer, category, and how badly they want your product.

Chargebacks: $4.20 (2.1% of retail)

Automatic deductions for operational errors. Late shipments ($100-500 per incident), wrong packaging ($250-2,500), fill rate misses (3-5% of entire order value), labeling errors, ASN errors. These are in the vendor agreement. They are deducted automatically. A well-run operation minimizes these. A new brand learns about them the hard way.

EDI / Compliance: $3.90 (1.95% of retail)

Electronic Data Interchange setup and ongoing compliance. Every major retailer requires EDI for purchase orders, invoices, ASNs, and payment. Setup costs $3,000-10,000. Ongoing costs include third-party EDI providers, GS1 barcode registration, ISTA pack testing, and product liability insurance. We amortized setup costs across expected volume to get a per-unit figure.

Freight Allowance: $3.80 (1.9% of retail)

The retailer's deduction for inbound freight to their distribution centers. Some retailers require the brand to ship FOB origin (brand pays freight). Others deduct a freight allowance from invoices. For big-and-bulky home products, this number can be significantly higher.

What's NOT in this number

The $5 figure does not include returns (8% average for home goods), chargeback penalties beyond the baseline, damaged goods, warranty claims, or the cost of capital tied up in inventory for 60-120 days waiting for retailer payment. The actual profit on a bad quarter can go negative.

A note on sourcing

Some of these numbers come from proprietary industry data that is not freely available online. Where possible, we cite the original publisher and year. We also draw on direct experience operating $1B+ in retail programs across Costco, Home Depot, Best Buy, Amazon, and Walmart. Where our experience informs a number, we say so. Where a third-party source provides it, we cite it.