Markup vs margin: what is the difference?
The markup vs margin difference is what you divide the same profit by. Markup divides it by what the product cost you. Margin divides it by the price. A hoodie that costs you $30 and sells for $45 leaves $15, so it carries a 50% markup but only a 33% margin.
How do you calculate markup vs margin?
Markup = (price minus cost) ÷ cost × 100. Margin = (price minus cost) ÷ price × 100. For the hoodie, $15 ÷ $30 is a 50% markup and $15 ÷ $45 is a 33.3% margin. Markup is the one you price with: price = cost × (1 + markup). Margin is the one you measure with, because it shows how much of each sale you keep.
How do you convert markup to margin?
Margin = markup ÷ (1 + markup). Markup = margin ÷ (1 minus margin). Work in decimals, so a 50% markup is 0.5 ÷ 1.5 = 33.3%.
| Markup | Margin |
|---|---|
| 25% | 20% |
| 33.3% | 25% |
| 50% | 33.3% |
| 66.7% | 40% |
| 100% | 50% |
| 150% | 60% |
| 200% | 66.7% |
| 300% | 75% |
Margin never reaches 100%, however high the markup goes.
What markup do you need for a 50% margin?
A 100% markup, which means doubling your cost. Retail calls it keystone pricing. Price the hoodie at $60 and you keep $30 of every sale. To start from a target margin, divide cost by (1 minus margin), so a 40% margin means $30 ÷ 0.6 = $50. Add 50% to cost expecting to keep half, and you keep a third. At that markup, any sale deeper than a third off loses money: 35% off sells the $45 hoodie for $29.25, under its $30 cost.
Does Shopify show markup or margin?
Margin. On a product's page, open "Cost per item" in the Price section and enter what one unit cost you in its Cost box. Shopify then shows Profit and Margin in that section, and no markup figure. To read the markup, divide that Profit by your cost: $15 of profit on the $30 hoodie is 50%. If your prices include tax, both stay hidden on any product you charge tax on, as Shopify's help notes. Its profit reports can show a different margin after discounts and refunds, which profit margin covers.
Set a discount your margin can carry
Sledge does not read your product costs or work out markup or margin. It runs bundles and volume discounts that spend part of your margin, at the discount you set, to win a bigger order. On any paid plan, Growth Intelligence adds up what its suggested fixes could bring in as one dollar total, labeled "Est. potential": an estimate of sales, not of margin.
