The Difference Between Margin and Markup
In retail, wholesale, and e-commerce, the terms "Margin" and "Markup" are frequently confused, leading to disastrous pricing strategies. While both metrics essentially represent the same pool of profit, they represent that profit as a percentage of two completely different base numbers. The Margin and Markup Calculator resolves this ambiguity instantly. If you are calculating the effect of a specific sale, utilize our Discount Calculator.
What is Gross Margin?
Margin (specifically Gross Margin) is the percentage of your total sales revenue that is actually profit. It answers the question: "For every dollar I make in sales, how many cents do I get to keep?"
Margin = (Gross Profit ÷ Revenue) × 100
What is Markup?
Markup is the percentage you added to your wholesale cost to arrive at your final retail price. It answers the question: "By what percentage did I increase the price of the item compared to what I bought it for?"
Markup = (Gross Profit ÷ Cost) × 100
Real-World E-commerce Example
Assume you buy a piece of jewelry wholesale for $50.00 (Cost). You decide to sell it on your Shopify store for $100.00 (Revenue).
- Your Gross Profit is precisely $50.00.
- Your Markup is 100%, because you increased the item's cost by 100% (you doubled it) to reach the sale price.
- Your Margin is 50%, because out of the $100.00 of total revenue handed to you by the customer, exactly half of it (50%) represents profit.
Frequently Asked Questions (FAQs)
Can Margin ever be 100%?
No. Because Margin is a percentage of the total Revenue, it cannot reach 100% unless your Cost of Goods Sold (COGS) is exactly $0.00 (which is virtually impossible in physical retail). Conversely, Markup can easily be 500% or 1000%.
Which metric do investors care about more?
Investors almost exclusively operate on Margin. Gross Margin is a standardized metric on income statements globally. Markup is generally treated as an internal pricing strategy tool used by merchandise buyers.