Margin vs. Markup Explained: Formulas & Key Differences

By Tracy NgMay 27, 20259 min read
Margin vs. Markup Explained: Formulas & Key Differences
  • Markup is how much you increase your product cost to set a selling price.
  • Margin is the percentage of revenue that turns into profit after covering the cost of goods.
  • Evaluating overall profitability: Margin tells you what percentage of your revenue is profit after covering costs.
  • Setting profit goals: Retailers and brands often set target margins to ensure sustainable growth.
  • Assessing discount impacts: When running promotions or sales, tracking margin helps you see how reduced prices affect your profits.
  • Financial reporting: Margin is commonly used in income statements and key performance indicators (KPIs).
  • Pricing products: Markup helps you set prices that cover your costs plus desired profit.
  • Calculating wholesale prices: Wholesalers often use markup percentages based on cost to set their prices.
  • Budgeting costs: Markup clarifies the profit margin you’re building on top of your costs.
  • Comparing supplier offers: Understanding markup helps evaluate how supplier costs affect your pricing power.

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Tracy Ng

Senior Content Executive at TrueProfit & SEO/Content Specialist

Tracy is a senior content executive at TrueProfit – specializing in helping eCommerce businesses scale profitably through content. She has over 4 years of experience in eCommerce and digital marketing editorial writing. She develops high-impact content that helps thousands of Shopify merchants make data-driven, profit-focused decisions.

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