Finance

Profit Margin vs Markup: The Difference That Costs Retailers Millions

Pricing managers, ecommerce operators and even seasoned founders mix these two up constantly. The math is trivial; the consequences of confusing them are not.

The Two Formulas

Markup (%) = (Price − Cost) ÷ Cost × 100

Margin (%) = (Price − Cost) ÷ Price × 100

Use our Markup Calculator and Profit Margin Calculator to convert quickly.

Why They’re Not the Same

Cost: $50. Price: $75. Profit: $25.

• Markup = 25 ÷ 50 = 50%
• Margin = 25 ÷ 75 = 33.3%

A “50% markup” sounds like a fat margin. It isn’t.

The Conversion Cheat Sheet

• 20% markup → 16.7% margin
• 50% markup → 33.3% margin
• 100% markup → 50% margin
• 200% markup → 66.7% margin

Which One Should You Use?

Margin for financial reporting, investor decks, and comparing to competitors. Markup for setting prices off cost.

2026 US Margin Benchmarks

• Grocery: 2–4%
• Apparel DTC: 50–65% gross
• SaaS: 70–85% gross
• Restaurants: 5–15% net

FAQs

Can margin exceed 100%? No — margin is capped at 100% (when cost is zero). Markup can be unlimited.

Which is better for pricing decisions? Margin. It tells you what you actually keep.