Retail Margin Calculator
Margin and markup are not the same thing — and confusing them is one of the most common pricing mistakes in retail. Here's how to calculate both correctly, what the numbers mean, and how to use them to set prices that actually hold up.
Margin vs markup — the difference
- Gross margin % = (Selling price − Cost) ÷ Selling price × 100
Margin is expressed as a percentage of the selling price. - Markup % = (Selling price − Cost) ÷ Cost × 100
Markup is expressed as a percentage of the cost.
Same product, same numbers — two different percentages. Always clarify which one you mean when discussing pricing with a buyer, accountant, or supplier.
Worked example
You buy a product for $25 and sell it for $60.
| Metric | Calculation | Result |
|---|---|---|
| Gross profit per unit | $60 − $25 | $35.00 |
| Gross margin % | $35 ÷ $60 × 100 | 58.3% |
| Markup % | $35 ÷ $25 × 100 | 140% |
Working backwards from a target margin
If you want to achieve a specific gross margin, calculate the required selling price from cost:
- Selling price = Cost ÷ (1 − Target margin)
Example: cost is $25, target margin is 60%.
- Selling price = $25 ÷ (1 − 0.60) = $25 ÷ 0.40 = $62.50
What margins to target
Benchmarks vary by category, but common retail targets:
| Category | Typical gross margin range |
|---|---|
| Apparel and accessories | 50–65% |
| Home goods and gifts | 45–60% |
| Food and grocery (retail) | 25–35% |
| Electronics | 15–30% |
| Jewellery and handmade | 60–75% |
These are gross margins — they don't account for operating expenses. Your net margin (after rent, wages, and overheads) will be significantly lower. Gross margin gives you the headroom; it doesn't tell you whether the business is profitable on its own.
Margin in a wholesale context
When you're selling wholesale, there are two margins to think about:
- Your margin at wholesale price — (Wholesale price − Your COGs) ÷ Wholesale price
- Your retailer's margin — (RRP − Wholesale price) ÷ RRP
Retailers typically need 45–55% margin to stock a product. If the maths doesn't work at their required margin, the wholesale channel isn't viable at your current cost structure.
Price your products by working backwards from where each channel needs to land — not by adding a percentage to cost and hoping it covers everything.
Protecting margin during a sale
When running a promotional discount, check the margin at the sale price before scheduling it. A 30% discount on a product with 45% margin leaves you at 21% — potentially below your operating breakeven. Know the floor before you schedule the sale.