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.
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.
