Retail margin explained for consumer brands

Australian retailer margins commonly run 25 to 45 percent of the shelf price, and the spread is mostly category, not negotiation. Grocery staples sit toward the bottom of that range. Beauty, supplements and other high-touch categories sit toward the top. Buyers work to category margin targets, and a challenger brand rarely moves them.

That cut is the number most founders find first, because it is the easiest to find. It is also the least dangerous, because you can see it. The deductions that break retail launches are the ones that arrive later, off the payment, after trading terms are signed. Retail margin is not one number. It is a waterfall.

A pricing waterfall is the ladder from the shelf price down to what actually reaches your bank account per unit. Build it per product, per retailer, because every line moves between them.

If the last line is thin at full price, promotional weeks will push it negative. Model the promoted price as its own waterfall, not as a discount off the good one.

Trade spend is the money you give back to the retailer to trade: case deals, promotional funding, co-op marketing, settlement rebates. It commonly runs 10 to 25 percent of gross sales, and it is deducted from what you are paid rather than invoiced to you. That is why founders who track revenue but not deductions believe their margin is better than it is.

The honest concession first: nobody can tell you your exact trade spend before trading terms are in front of you. It depends on category, promotional cadence and the program you agree to, and most founders have not modelled it at all. So model the range instead. Run your waterfall at 10, at 18 and at 25 percent. If the business only works at 10, you do not have a retail-ready price. Fix the price architecture before the review, because you will not fix it after.

Three more numbers belong in the model. First, chargebacks: 1 to 5 percent of invoice value when compliance fails, deducted rather than negotiated. The fix is operational. EDI, electronic data interchange, the ordering and invoicing system major retailers require, takes months to stand up, not weeks, so it cannot be left until the first order.

Second, cash timing: a first purchase order commonly lands one to six months after a range-review win, and you fund production and freight before the retailer pays you. Third, the stakes: 871 retail businesses entered insolvency for the first time in FY25. Many did not run out of margin on paper. They ran out of cash in the gap between the model they had and the deductions they got.

A range review is the retailer's scheduled decision on what joins, stays on, or leaves the shelf. Reviews run roughly every six months in most categories, and the invitation to present can come with about two weeks' notice. Two weeks is enough time to polish a model that exists. It is not enough time to build one.

The buyer decides the ranging. The model decides whether you should want them to.

This is the work our Retail-Readiness Sprint exists to do: a fixed fee, $15,000 for a single-retailer scope or $25,000 multi-retailer, about four weeks, covering your real trade spend model, pricing waterfall, review calendar and compliance gap list. You keep the model whoever you hire next. Sometimes the model says not yet, and that verdict costs a fixed fee instead of a warehouse of dead stock. Either way, walk into the review with a waterfall, not a hope.