How to Price Products for Your Online Store in India (Step by Step)
Many new stores lose money without knowing it. Use this simple formula to price products so shipping, COD and returns do not eat your profit.
- Price = all your costs per order + your profit margin. Costs include product, packing, shipping, payment or COD charges, returns and marketing.
- Work out your costs per order first, then decide the margin. Never copy a competitor's price without checking your own costs.
- Plan for returned and refused COD orders. They cost you shipping both ways.
- Test your price with a small number of products, then adjust using real order data.
You found good products for your online store. Now comes the hard part: what price should you put? Price too high and nobody buys. Price too low and every order quietly loses money once shipping, COD and returns are counted.
This guide shows you how to price products for an online store in India step by step, with a simple formula you can use in a spreadsheet today.
Why most new store owners price products wrongly
Most beginners do this: "I buy it for ₹100, I will sell it for ₹199, so I make ₹99." That ₹99 is not profit. It still has to pay for:
- Packing material and labels.
- Courier shipping.
- Payment gateway fees or COD collection charges.
- Orders that come back as returns or are refused at the door.
- Ads or promotion that brought the buyer.
- Taxes, if they apply to your business.
When you add these up, a "₹99 margin" can shrink to very little, or even a loss.
The simple product pricing formula
Use this formula for each product:
Selling price = Product cost + Packing + Shipping + Payment/COD cost + Return allowance + Marketing cost per order + Your profit
Every number here is per order. Let us go through each part.
How to calculate each cost (step by step)
Step 1: Product cost
What you pay your supplier for one piece, plus any cost to bring it to you. If you buy in bulk, divide the total bill (including transport) by the number of pieces.
Step 2: Packing cost
Add the cost of the courier bag or box, tape, bubble wrap, label and thank-you card. Buy one packet of each, count how many orders it covers, and divide.
Step 3: Shipping cost
Courier rates depend on weight, size, distance and your shipping partner. Get the real rate card from your courier or shipping aggregator. Use the rate for your most common delivery zone, not the cheapest one.
Step 4: Payment or COD cost
Online payment gateways charge a fee per transaction. Couriers usually charge a fee to collect cash on delivery. Check the current rates on your gateway and courier pages, because they differ by plan and change over time. Our guide on setting up a payment gateway for your store explains the options.
Step 5: Return and RTO allowance
Some orders will be returned, and some COD orders will be refused (called RTO, return to origin). You often pay shipping both ways and earn nothing. Set aside a small amount per order to cover this.
How much? Start with a careful guess, then replace it with your real return rate after your first 50-100 orders. Our guide to reducing COD returns shows ways to bring this cost down.
Step 6: Marketing cost per order
If you spend money on ads or influencer posts, divide that spend by the number of orders it brought. If all your sales come from free WhatsApp and social posts, this may be close to zero for now.
Step 7: Add your profit margin
Now decide how much you want to keep. Your margin pays for your time, website costs and growth. A margin that is too thin leaves no room for a bad week.
Example: pricing a product (sample numbers)
| Cost item | Example amount |
|---|---|
| Product cost | ₹80 |
| Packing | ₹8 |
| Shipping | ₹50 |
| Payment / COD cost | ₹15 |
| Return and RTO allowance | ₹15 |
| Marketing per order | ₹10 |
| Total cost per order | ₹178 |
| Profit you want | ₹40 |
| Minimum selling price | ₹218 |
In this example, selling at ₹199 would make you only ₹21 per order, and selling at ₹149 would lose money on every sale. That is why you calculate first.
Free shipping or charge shipping: which is better?
| Option | Good for | Watch out for |
|---|---|---|
| Free shipping (cost inside price) | Simple checkout, buyers like it | Product price looks higher |
| Flat shipping charge | Low-priced products | Some buyers leave at checkout |
| Free shipping above an order value | Getting buyers to add more items | Set the limit using your real costs |
| Extra COD charge | Covering COD fees, pushing online payment | Show it clearly before the order is placed |
Whatever you choose, show all charges clearly before the buyer places the order. Surprise charges at the last step cause cancelled carts and complaints.
Price points that look attractive
- Charm prices like ₹199 or ₹299 are common in Indian stores. Use them, but only if the price still covers your costs.
- Price bands: group products at a few fixed prices, such as ₹149, ₹249 and ₹399. This makes your store easy to browse.
- Combos: sell two related items together. One shipping cost covers two products, so your margin improves.
- Honest "MRP" and discount: only show an original price if it is real. Fake discounts damage trust and can create legal trouble.
How to check competitor prices the right way
- Find 3-5 sellers of a similar product.
- Note their product price, shipping charge and COD charge. Compare the total the buyer pays.
- Compare quality, photos, delivery time and return policy, not just price.
- If you cannot match their price and still make a profit, compete on something else: better photos, faster replies, combos or a clearer size guide.
Common product pricing mistakes
- Forgetting COD and return costs.
- Using the cheapest courier zone rate for every order.
- Pricing every product the same way, even heavy and light ones.
- Never updating prices when supplier or courier rates go up.
- Ignoring taxes. Ask a CA or tax professional what applies to your business.
Review your prices every month
After you start getting orders, make a simple sheet with each order's real costs. Once a month, check:
- Your actual return and RTO rate.
- Your real average shipping cost.
- Which products make the most profit, not just the most sales.
Raise prices where you lose money, and promote products where you earn well. If you are still waiting for orders, read how to get the first orders for a new online store.
Final word
Good pricing is not a guess. Add up every cost per order, add a margin you are happy with, show all charges clearly, and adjust using real data. A smaller number of profitable orders is better than many orders that lose money.
Next step: put your top five products into a spreadsheet using the formula above. If you want your own store website with COD checkout, see the Meesho-style Shopping Store Script or try the live store demo.
Frequently asked questions
How much profit margin should I keep on products?
There is no single right number. Add up all your costs per order first, then choose a margin that leaves room for slow weeks and growth, and review it with real order data.
Should I offer free shipping?
Free shipping is popular, but the cost must be built into your product price. Many stores offer free shipping only above a certain order value.
How do I include COD returns in my price?
Set aside a small return allowance per order. After your first 50-100 orders, replace your guess with your real return and RTO rate.
Should I copy competitor prices?
Use competitor prices as a reference, but only after you know your own costs. Compare the total price the buyer pays, including shipping and COD charges.