When talking about a product sale, margin and markup both refer to the profit made when a product is sold. But both approach this from a different angle, and it's important to know the difference so you can speak confidently with suppliers or retailers, depending on which side of the supply chain you fall.
On this page
- Markup vs margin calculator
- What is markup?
- How to calculate markup with a formula
- What is margin?
- How to calculate margin with a formula
- As a retailer, what is a good margin?
Markup is the (%) amount you increase the wholesale price/cost of a product by to arrive at the selling (retail) price.
Margin is how much lower the cost of the product is than the selling price (as a %), or essentially the profit you make on the product shown as a percentage of the retail price.
Markup vs margin calculator
To see this difference in practice, try plugging some numbers into the markup vs margin calculator below:
As the difference between wholesale/cost price and retail price increases, so does the difference between markup and margin. That’s just one reason why it’s so important to nail the difference between the two!
What is markup?
When we talk about wholesale, markup is the percentage (or absolute value) difference between the wholesale price and the retail price. But unlike margin, here you’re starting with the wholesale price and looking at how much this has increased to reach the retail price.
Outside of wholesale, markup can also mean the difference between the cost of producing a product and the final price it is sold for.
Markup can either be proportional (a percentage of the cost of the product), or absolute (a flat fee added to the cost of the product). Percentage markup is more common.
You’ll also sometimes see markup written as a number, such as 2.5. This is an alternative to the percentage method as it’s still proportional to the price of the product, but this number is how many ‘times’ the wholesale price the retail price should be (e.g. 2.5 x WSP = RRP).
How to calculate markup with a formula
Here’s the formula for calculating product markup:
Markup (%) = (Retail price — wholesale or cost price) / wholesale or cost price x 100
Markup calculator
To save you time, we’ve created a couple of simple calculators below to help you either calculate what your retail price should be (with a percentage markup), or to work backwards and find your markup based on your wholesale and retail price.
How to calculate your retail price when you know your wholesale/cost price and desired markup:
How to calculate your markup based on your wholesale/cost price and retail price:
What is margin?
When we talk about a product’s margin, aka profit margin, we’re talking about the difference between a product’s retail price and its cost (or wholesale price), but working backwards from the retail price. So essentially, it’s finding the product’s profit (retail price minus wholesale price, or cost of the product) and converting this into a percentage of the retail price.
How to calculate margin with a formula
Here’s the formula for calculating margin (profit margin) for a product:
Margin (%) = (Retail price — wholesale or cost price) / retail price x 100
Margin calculator
Use the calculators below to find your profit margin based on existing retail price and wholesale price, or to find what wholesale price you need to negotiate in order to get the margin you want.
How to calculate your profit margin when you know the wholesale price and the retail price:
How to find the wholesale price you need to negotiate get the profit margin you want:
How to calculate margin with a formula
When you’re looking to shop wholesale products to sell in your store, you’ll want to check that the margin makes it a viable — and profitable — item to stock.
What makes a ‘good’ margin partly depends on your business and the overheads you’re dealing with. While the calculations above only take into account the product cost rather than your other fixed costs, when you look at your business as a whole, this is something you need to consider.
We often hear from retailers (particularly brick and mortar ones with higher costs)
A ‘good’ margin also varies by product category. Perishable items, like food, generally need a higher margin as there’s a time limit on when they can be sold. Fashion products also ideally need a higher margin — the products won’t literally expire, but they’ll still need clearing out ahead of the new season.
Take a look at our guide to buying wholesale for more tips on what makes a good margin for your product.
Margin vs markup: final thoughts
Margin and markup are different ways of talking about the profit a product makes. We hope we’ve done a good job of clarifying the difference between them. But if you’re still unsure, don’t worry — just refer back to the calculators above whenever you need to check. Or to handle this for multiple products at once, lift the formulae above to include in Excel or Google Sheets.
Related article:
Browse Popular Categories at CREOATE: Wholesale Jewellery | Wholesale Gifts | Wholesale Stationery | Wholesale Beauty Products | Wholesale Mugs | Wholesale Homeware | Wholesale Pet Supplies | Wholesale Gourmet Food | Wholesale Garden & Outdoor | Wholesale Baby & Kids Products
Browse Trending Collections on CREOATE: Wholesale Halloween | Wholesale Mother's Day Gifts | Wholesale Father's Day Gifts | Wholesale Valentine's Day Gifts | Wholesale Spiritual Supplies
>> View all
