Margins Vs. Mark Up

When working with new producers, I notice there are many questions around margins and mark-up. Many people are confused, and use the terms interchangeably, but there is a difference.

Mark-up is how much a retailer “marks up” a product from the wholesale cost. For example, if a retailer keystones, she or he is doubling, or using 100% mark-up. In other words, marking up 100% on the WHOLESALE PRICE.

Margin is something different, and the more important and relevant term. Margin refers to a percentage of the RETAIL PRICE. So using the keystoning example, if you double the wholesale price, your MARGIN is 50% (of the retail price). The retail industry uses margins for virtually all their financial analysis and other factors, so when we (or buyers) mention a percentage margin, we are talking about a percent (i.e. margin) of the RETAIL price.

6 comments for “Margins Vs. Mark Up

  1. May 21, 2011 at 10:34 am

    Great post Sandy thank you for clarifying. I’m having some trouble keeping all the financial terms and meanings straight. But thank you for breaking it down.

  2. May 21, 2011 at 11:46 am

    Glad to help out!

    Sandy

  3. Tom
    August 10, 2011 at 6:09 am

    Hello Sandy.
    Pleas tell my do my calculation are right.

    My RRP are 5.49$
    and Wholesale price are 3.29$
    Do this 2.20$ are 40% margin?
    (5.49-3.29)/5.49*100=40%
    And if mark up so it’s
    3.29+67%=5.49 $
    Is it right?

  4. August 12, 2011 at 12:56 pm

    Yes, Tom your calculation are correct!!

    Sandy

  5. November 2, 2011 at 6:11 pm

    So what is a normal margin? What do most people charge for wholesale items? 50% of the Retail price?

    I know the formulas with cost and profit margin, however I know that most retailers have a magic percent in their head.

  6. November 2, 2011 at 6:36 pm

    Hi Karin,

    Most retailers keystone the price of products. In other words, they double the cost to come up with the retail price.

    More info here: http://www.squidoo.com/pricing-your-products-for-the-wholesale-market

    Best,
    Sandy

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