Glossary: Pricing

Markup

Markup is the amount added to a product's cost to reach its selling price, usually shown as a percentage of cost. A $10 item sold at $15 has a 50% markup, which is a 33% margin, because margin is measured against the selling price.

Reviewed by Hoa Nguyen, Senior Marketer. Last reviewed October 4, 2026
Last updated October 4, 2026

In detail

The two formulas are simple. Markup % = (price - cost) / cost x 100. Margin % = (price - cost) / price x 100. Mixing them up costs money: a seller who wants a 50% margin but applies a 50% markup ends up with a 33% margin.

To reach a target margin, divide the cost by one minus the margin. For a 40% margin on a $12 cost, the price is 12 / 0.6 = $20, which is a 66.7% markup. Working from margin keeps you from underpricing when you set wholesale prices.

In a wholesale chain each party adds its own markup. The brand sells to a retailer at the wholesale price, and the retailer sells to shoppers at the retail price. A retailer that doubles its cost has a 100% markup and a 50% margin, which is why keystone pricing is a common starting point. Work backwards from the retail price and the margin the retailer needs, then check that your wholesale price still leaves you a margin.

Count more than the product cost. Freight, packaging, payment fees, returns, discounts and the cost of carrying net terms all reduce profit, so a markup on product cost alone overstates it. If you give different buyer groups different prices, check that the lowest tier still sits above your floor.

Example

A bag costs $12 to make. At a 66.7% markup the wholesale price is $20, a 40% margin. A retailer that doubles the $20 sells it for $40 and keeps a $20 margin, 50% of the retail price.