Markup formula
Markup is the amount added to cost to reach the selling price, expressed as a percentage of the cost.[1]
Because markup is measured against cost, it can be any size: a 300% markup on a $5 item is a $20 price. Margin, measured against the price, can never reach 100%. That difference is the whole of the margin vs markup question.
Markup to margin chart
Every markup has exactly one matching margin, given by margin = markup ÷ (1 + markup); the last column prices a $25 cost.
| Markup | Margin | Multiplier | Price for $25 cost |
|---|---|---|---|
| 10% | 9.1% | 1.10× | $27.50 |
| 20% | 16.7% | 1.20× | $30.00 |
| 25% | 20.0% | 1.25× | $31.25 |
| 30% | 23.1% | 1.30× | $32.50 |
| 40% | 28.6% | 1.40× | $35.00 |
| 50% | 33.3% | 1.50× | $37.50 |
| 60% | 37.5% | 1.60× | $40.00 |
| 75% | 42.9% | 1.75× | $43.75 |
| 100% | 50.0% | 2.00× | $50.00 |
| 150% | 60.0% | 2.50× | $62.50 |
| 200% | 66.7% | 3.00× | $75.00 |
| 300% | 75.0% | 4.00× | $100.00 |
Retailers often call a 100% markup keystone pricing: the price is double the wholesale cost, and the margin is 50%. Whether that is enough depends on the category. U.S. Census Bureau survey data put gross margins for clothing stores far above those for grocery stores, because the costs that each margin has to pay for are different.[2]
Average retail markup by type of store
The average U.S. retailer marks goods up about 45% over cost, which is the markup implied by the 31.1% gross margin the Census Bureau measured for all retail in 2022.[2] The table converts each published gross margin into the matching markup with markup = margin ÷ (1 − margin).
| Kind of business | NAICS | Gross margin | Implied average markup | Price for a $25 cost |
|---|---|---|---|---|
| Total retail | 44–45 | 31.1% | 45% | $36.28 |
| Furniture and home furnishings stores | 442 | 51.0% | 104% | $51.02 |
| Electronics and appliance stores | 443 | 29.4% | 42% | $35.41 |
| Building materials and supplies dealers | 4441 | 36.0% | 56% | $39.06 |
| Grocery stores | 4451 | 28.0% | 39% | $34.72 |
| Beer, wine and liquor stores | 4453 | 31.1% | 45% | $36.28 |
| Health and personal care stores | 446 | 32.9% | 49% | $37.26 |
| Pharmacies and drug stores | 44611 | 28.0% | 39% | $34.72 |
| Automotive parts, accessories and tire stores | 4413 | 48.1% | 93% | $48.17 |
| Clothing stores | 4481 | 50.6% | 102% | $50.61 |
| Shoe stores | 4482 | 50.9% | 104% | $50.92 |
| Sporting goods, hobby and musical instrument stores | 4511 | 44.6% | 81% | $45.13 |
| Department stores | 4522 | 42.0% | 72% | $43.10 |
| Warehouse clubs and supercenters | 452311 | 24.3% | 32% | $33.03 |
| Miscellaneous store retailers | 453 | 53.6% | 116% | $53.88 |
| Electronic shopping and mail-order houses | 4541 | 39.6% | 66% | $41.39 |
These are averages across whole stores, including clearance and shrink, so the markup on a new full-price item is usually higher than the store average. Use them as a sanity check, not as your price.
Mark up the landed cost, not the invoice price
Markup should be applied to the landed cost, which is the supplier price plus inbound freight, duties and the packaging you add, because those are part of the cost of goods.[3] Leaving them out makes a 100% markup look like keystone while the real markup is much lower.
| Invoice price only | Landed cost | |
|---|---|---|
| Supplier price | $8.00 | $8.00 |
| Freight, duty and packaging | — | $2.00 |
| Cost used for the markup | $8.00 | $10.00 |
| Price at 100% markup | $16.00 | $20.00 |
| Real markup on landed cost | 60.0% | 100.0% |
Pricing from the invoice alone gives a $16.00 price and only a 60.0% real markup; the landed-cost price is $20.00. The landed cost calculator adds up freight, duty and U.S. customs fees per unit for a whole shipment.
Working backward from a retail price
If the shelf price is fixed, for example a manufacturer's suggested retail price, divide it by (1 + markup) to get the most you can pay. With a 100% markup target, a $59.99 retail price means a cost of no more than $30.00. The "Price + markup" mode does this, and the margin calculator does the same from a target margin.
Common markup mistakes
- Using markup when you meant margin. A 30% markup is only a 23.1% margin. If your plan says "30% margin", price with the selling price calculator instead.
- Marking up the wrong cost. Include inbound freight and any direct labor in the cost before applying the markup; leaving them out shrinks the real margin.[3]
- Forgetting the cost of selling. A marketplace that takes 13% to 15% of the price, plus card processing, eats a large part of a modest markup. Check the net with the eBay fee calculator, the Etsy fee calculator or the profit margin calculator's other-costs field.
- Stacking markups on discounts. A 50% markup followed by a 20% sale leaves a 20% markup, not 30%: $100 × 1.5 × 0.8 = $120.
Frequently asked questions
How do you calculate markup?
Subtract the cost from the price, then divide by the cost: ($40 − $25) ÷ $25 = 0.60, a 60% markup.
How do I add a markup percentage to cost?
Multiply the cost by one plus the markup as a decimal. A $25 cost with a 60% markup: 25 × 1.60 = $40.
What is a 100% markup?
A 100% markup doubles the cost: a $25 item sells for $50. It is the same as a 50% margin.
Is markup the same as margin?
No. Markup divides profit by cost; margin divides it by price. A 60% markup is a 37.5% margin.
What markup do I need for a 40% margin?
Divide the margin by one minus the margin: 0.40 ÷ 0.60 = 66.7% markup.