Keystone pricing means setting the retail price at double the cost: buy a jar for $4.50, sell it for $9.00. That's a 100% markup on cost and a 50% margin on the price, the same price seen two ways. Stores use it because it's quick, easy to explain to a supplier, and close to what a lot of specialty and gift items need to cover rent, wages and the cards' fees. It's also the starting point most local makers hear when they ask a shop what it will charge: if your wholesale price is $4.50, expect the jar on the shelf near $8.99. Keystone doesn't fit everything. Staples like milk sell on price, so a store prices them well below keystone and makes it up elsewhere; cheap, high-volume items like bottled water and fountain coffee sell far above it; and items that spoil or break need more than keystone, because shrink takes part of what you bought before it sells. In the example below, a Bangor corner store checks six items against keystone. Below are the formula, where it fits, shrink, the example, and a free calculator.
The short version
- Keystone price = cost × 2.
- That's a 100% markup on cost and a 50% margin on price.
- It's quick, and common for gift, specialty and local products.
- Local makers: a shop at keystone puts your $4.50 wholesale jar near $8.99.
- Staples like milk sell well below keystone; water and coffee far above.
- Items that spoil or break need more than keystone to keep 50% after shrink.
- Price to keep 50% after shrink = cost ÷ ((1 − shrink) × 0.5).
- TaroStack keeps each item's cost and margin as prices change. More below.
The formula
| Measure | Formula | At a $4.50 cost |
|---|---|---|
| Keystone price | Cost × 2 | $9.00 |
| Markup | (Price − cost) ÷ cost | 100% |
| Margin | (Price − cost) ÷ price | 50% |
| 50% margin after 8% shrink | Cost ÷ ((1 − 0.08) × 0.5) | $9.78 |
Markup and margin are compared in markup vs margin, and markup on its own in markup percentage formula.
Where keystone fits, and where it doesn't
| Kind of item | Price against keystone | Why |
|---|---|---|
| Local and specialty foods, gifts | Near keystone | Slow sellers that need the margin |
| Staples: milk, eggs, bread | Below keystone | Shoppers compare prices; they bring people in |
| Bottled water, fountain coffee | Far above keystone | Low cost, convenience prices |
| Perishables with waste | Above keystone | Shrink takes part of the stock |
What a corner store's categories earn is in convenience store profit margin.
An example: a Bangor corner store
Penobscot Corner Store, the made-up corner store in Bangor, Maine, I use in these examples, checks six items against keystone:
| Item | Cost | Keystone | Shelf price | Margin | Vs keystone |
|---|---|---|---|---|---|
| Local blueberry jam | $4.50 | $9.00 | $8.99 | 49.9% | −$0.01 |
| Cola, 20 oz | $1.15 | $2.30 | $2.49 | 53.8% | +$0.19 |
| Water, 16.9 oz | $0.18 | $0.36 | $1.29 | 86.0% | +$0.93 |
| Milk, gallon | $3.10 | $6.20 | $4.29 | 27.7% | −$1.91 |
| Local bread, loaf | $3.25 | $6.50 | $6.49 | 49.9% | −$0.01 |
| Coffee, 16 oz cup | $0.55 | $1.10 | $2.25 | 75.6% | +$1.15 |
The jam sits at keystone and keeps it, since it barely spoils. The local bread sits at keystone too, but about 8% of loaves go stale unsold, so keeping a true 50% would take $7.07; the store either raises it, orders fewer loaves, or accepts less. The milk is the store's traffic item, priced to match the supermarket. How the store counts and orders is in convenience store inventory spreadsheet.
Get the calculator
Download the keystone pricing calculator. One sheet: each item's cost, the keystone price, your price, the margin and markup, how far your price sits from keystone, with anything below it in red, and the price that keeps a 50% margin after shrink. It's an ordinary Excel file with no macros, and it works in Google Sheets, LibreOffice and Numbers.
Where this stops working
Costs move every few deliveries, and a keystone price set in spring is a 44% margin by fall. A calculator only knows the cost you typed in.
How TaroStack does it
TaroStack keeps each item's cost and margin as prices change.
Costs from receiving. Each delivery is received at what you paid, so each item's cost follows the supplier's price.
Price creep. A price-creep report per supplier shows whose prices are rising, so you see the jam going from $4.50 to $4.95 before your margin shrinks quietly.
Margins and losses. Margins are reported by product, and stale bread written off with its reason shows what shrink costs each item.
| The job | Notebook | In TaroStack |
|---|---|---|
| Today's cost of a jar | The last invoice | Cost from receiving |
| Whose prices are rising | Noticed late | Price creep by supplier |
| What stale bread costs | A guess | Losses by reason and item |
Receiving, the price-creep report, margins by product and losses with reasons are on every plan, from $49 a month. The first 30 days are free, with no credit card. If you'd like a hand setting up, ask, and we'll do it with you.