Convert between markup and margin, and work out the price you need from either one. Enter what an item costs you and any one of the three other numbers, and this fills in the rest.
Markup and margin measure the same gap against different denominators. Markup is the gap as a percentage of what the item cost you. Margin is the same gap as a percentage of what you sold it for. Because the selling price is always the larger number, the margin is always the smaller percentage, and the difference grows fast as the numbers rise.
This causes real losses. A supplier says a product carries 40 per cent, a retailer hears 40 per cent margin and prices for it, and ends up with 28.6. A wholesaler quotes a keystone markup of 100 per cent, which sounds enormous and is a 50 per cent margin. Nobody is lying in either conversation; they are using different words for different fractions and assuming the other person means theirs.
The rule worth memorising is that markup is always the bigger number. If somebody quotes a percentage and you cannot tell which one they mean, assume the flattering one and check, because the one that decides whether you make money is the margin.
The same gap, said two ways
| Markup | Margin | On a $20 cost, the price is |
|---|---|---|
| 25% | 20.0% | $25.00 |
| 50% | 33.3% | $30.00 |
| 75% | 42.9% | $35.00 |
| 100% | 50.0% | $40.00 |
| 150% | 60.0% | $50.00 |
| 200% | 66.7% | $60.00 |
| 300% | 75.0% | $80.00 |
Markup is the gap over cost. Margin is the gap over price. Doubling the price is a 100 per cent markup and a 50 per cent margin, and no amount of markup ever reaches a 100 per cent margin.
Where this bites in ecommerce
Marketplace fees come off the margin, not the markup. A fee is a percentage of the selling price, which is the same denominator margin uses. If you sell at a 30 per cent margin and the marketplace takes 13, you are keeping 17, not 30 minus a markup.
Discounts move the margin faster than they look. Twenty per cent off a price at a 40 per cent margin leaves a 25 per cent margin, not 20. The discount comes entirely out of the gap, and the gap is smaller than the price it is measured against.
Free shipping is a margin line. Absorbing $6 of postage on a $35 item at a 43 per cent margin takes it to 26. It is not a marketing cost sitting somewhere else in the accounts; it is a direct subtraction from the gap on every order it applies to.