How to price products in your shop so you still make money

You buy a carton at the wholesaler, add something on top, and write the price on the shelf. Your neighbour sells the same thing for Ksh 5 less, so you match them. At month end, the shelves have turned over many times, but there is little left.

Usually the price was never built to cover everything the shop costs. Here is how to set prices that do, step by step, with the numbers of a made-up duka.

The short version

1. Work out what each item really cost you to get onto the shelf.
2. Work out the margin your shop needs: the share of every sale that must stay with you to pay rent, wages and yourself.
3. Use selling price = cost ÷ (1 − margin). Then round it and check it against the market.
4. Give fast sellers a thin margin and slow or risky items a thicker one, so the average is what the shop needs.

Step 1: Find the real cost of each item

The buying price on the wholesaler's receipt is only part of the cost. Add:

• Transport. The boda or matatu trip to collect stock. Spread it over what you brought back. A Ksh 400 trip for Ksh 20,000 of stock adds 2% to every item in that load.
• Losses. Eggs that crack, bread that goes stale, tomatoes that go soft, sachets that burst. If you buy 30 and can only sell 28, the 28 must carry the cost of all 30.

This is your landed cost: what the item cost by the time it is on your shelf, ready to sell.

Price from the next restock, not the last one. When the wholesaler raises a price, the stock you already have must be sold at a price that pays for the new stock.

Step 2: Mark-up and margin are not the same

Mark-up is what you add, as a share of your cost. Margin is what you keep, as a share of the selling price.

Buy at Ksh 100 and sell at Ksh 125. The mark-up is 25%. But of the Ksh 125 the customer pays, Ksh 25 is yours: that is 20% of the sale. So a 25% mark-up gives a 20% margin.

Your running costs are paid out of sales, so the number that matters is margin. This table shows the mark-up you need for each margin:

The formula behind it: selling price = landed cost ÷ (1 − margin). For a 20% margin, divide by 0.8. For 25%, divide by 0.75.

Step 3: Work out the margin your shop needs

1. Add up your monthly running costs: rent, wages, electricity tokens, airtime and data, and yearly costs like the county business permit divided by 12. (Transport is already in your landed cost, so leave it out here.)
2. Add what you need to take for yourself each month.
3. Divide by what you expect to sell in a month.

That is the share of every sale the shop must keep, on average.

Then add the costs that take a share of every sale:

• Turnover tax, if you are registered for it: 1.5% of gross sales, as of November 2026, according to KRA's turnover tax page.
• M-Pesa charges. For Buy Goods tills, payments of Ksh 500 or less are free for the business and larger ones cost 0.55%, capped at Ksh 200, The Standard reported in August 2026. Check your statement for what you really pay.
• VAT, if your shop is registered. KRA's VAT page puts the general rate at 16% and says registration applies once taxable sales reach Ksh 5 million in a year. On a Ksh 116 sale of a taxable item, Ksh 16 belongs to KRA, so work out your margin on the Ksh 100. If you are registered, ask KRA or an accountant how VAT on your stock is handled.

A worked example: a duka in Thika

This is a made-up shop. Every number is an example.

She expects to sell Ksh 300,000 a month. So the shop must keep 60,000 ÷ 300,000 = 20% of every sale. She is registered for turnover tax, which takes another 1.5%. Allowing a little for M-Pesa charges, she aims for an average margin of 22%.

Soap. A carton of 24 bars costs Ksh 1,680, so Ksh 70 a bar. Her transport adds 2%: 70 × 1.02 = Ksh 71.40 landed. Soap moves slowly and doesn't spoil, so she aims for 25%: 71.40 ÷ 0.75 = Ksh 95.20. She prices it at Ksh 95. Her margin: (95 − 71.40) ÷ 95 = about 25%.

Eggs. A tray of 30 costs Ksh 390 with transport. That looks like Ksh 13 an egg. But about 2 in every tray crack, so the 28 she sells cost 390 ÷ 28 = Ksh 13.93 each. At Ksh 15 an egg she thought she was keeping Ksh 2 (over 13%). She is really keeping Ksh 1.07, about 7%. To reach 20% she would need 13.93 ÷ 0.8 = Ksh 17.41, about Ksh 17 or 18 an egg.

If nearby shops sell eggs at Ksh 15, she may have to stay there, knowing eggs earn her only 7%.

Step 4: Mix your margins

A shop doesn't need the same margin on every item. It needs the right average.

• Fast sellers that every customer compares (flour, sugar, cooking fat, milk, bread) often carry a thin margin. They bring people through the door.
• Slow sellers, convenience items and things people buy on impulse (snacks, cold drinks, phone accessories, small household items) can usually carry more.
• Perishables need extra margin to cover what spoils, or very careful buying.

Here is how the mix works. If half the Thika shop's sales are fast sellers at 12%, the other half must earn 32% for the average to reach 22%: (12 + 32) ÷ 2 = 22. If she can't get 32% on the rest, she needs to sell more, cut costs, or raise some prices.

Risiti shows what's left after costs (sales minus costs) every day, week and month, so you can see whether your prices are really covering the shop (how it works).

Check your price against the market

The formula gives you the price you need. The market tells you the price you can get. Before you write it on the shelf:

• Walk around. Note what two or three nearby shops charge for your top 20 items.
• Look at the printed price. Many manufacturers print a recommended price on the pack. Customers know it.
• Round sensibly. Prices ending in 0 or 5 make change easier, especially for cash.
• Charge what you display. In 2022 the Competition Authority of Kenya warned retailers against charging more at the till than the shelf price, after shoppers complained, Business Daily reported. Change the label when you change the price.

If the market price leaves you no margin on an item, you have three choices: buy it cheaper (another wholesaler, bigger loads, sharing transport), accept a thin margin and earn more elsewhere, or stop stocking it.

Mistakes that quietly eat your margin

• Pricing from the buying price only, forgetting transport and losses.
• Treating mark-up as margin, so a 20% mark-up leaves you only 17%.
• Not repricing when the wholesaler goes up. Your margin shrinks a little with every restock, and nobody notices.
• Giving discounts from memory. A Ksh 10 discount on a Ksh 100 item with a 20% margin gives away half your profit on it.

For finding out whether the whole shop is making money, read our guide to working out your shop's real profit. Risiti for shops brings in sales from staff WhatsApp reports and M-Pesa messages, and costs from receipt photos, so the monthly numbers you need for Step 3 are already added up.

What to do today

1. Add up your monthly running costs and what you take for yourself. Divide by your monthly sales. That is the margin your shop needs.
2. Take your 20 best-selling items. Work out the landed cost of each, including transport and losses.
3. Work out the margin each one earns at today's price: (price − landed cost) ÷ price.
4. Mark the ones below what the shop needs. Raise what the market allows, and decide where to make up the rest.
5. Keep your wholesaler receipts. Next time a price goes up, reprice the shelf the same day. Our guide to record keeping for small businesses shows what else to keep.

Sources

• Kenya Revenue Authority, Turnover Tax (TOT), accessed November 2026
• Kenya Revenue Authority, Value Added Tax, accessed November 2026
• The Standard, Safaricom halves M-Pesa merchant fees in CBK-led move, 2 August 2026
• Business Daily, Fiddle with prices at own risk, CAK warns retailers, 10 November 2022