Markup vs margin, and how to price from supplier cost.
Markup is what you add to cost. Margin is what you keep from the price. Mixing them up is the most common pricing mistake in webshops, and it always errs on the cheap side.
Updated · Monine AS
Short answer
Markup is profit divided by cost; margin is profit divided by selling price. Price = cost × (1 + markup). Margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). Example: a cost of 100 with a 50% markup gives a price of 150 and a margin of 33.3%. To earn a 50% margin you need a 100% markup.
The formulas
- Price = cost × (1 + markup)
- Markup = (price − cost) ÷ cost
- Margin = (price − cost) ÷ price
- Markup from margin = margin ÷ (1 − margin)
- Margin from markup = markup ÷ (1 + markup)
Conversion table
| Markup | Margin | Price at cost 100 |
|---|---|---|
| 25% | 20.0% | 125 |
| 40% | 28.6% | 140 |
| 50% | 33.3% | 150 |
| 60% | 37.5% | 160 |
| 80% | 44.4% | 180 |
| 100% | 50.0% | 200 |
| 150% | 60.0% | 250 |
| 200% | 66.7% | 300 |
VAT: price ex VAT first
Do the markup on the cost without VAT, then add VAT to the result if your shop shows prices including VAT. If the supplier's price list already includes VAT, remove it first, or you will be marking up the tax. Example with 25% VAT: cost 100 ex VAT, markup 60% → 160 ex VAT → 200 including VAT.
Different markups for cheap and expensive items
A flat percentage tends to overprice expensive items and underprice cheap ones, where handling and shipping eat most of the margin. A common pattern is tiered markup: for example 120% under 100, 70% from 100 to 1 000, 40% above 1 000. OhoSync calls these cost bands and applies them per product on every update.
Rounding
After the markup, round to the price points your customers expect: .99, whole numbers, or prices ending in 90 in Nordic shops. Round up, so rounding never eats into the margin you calculated.
Questions
Is a 50% markup the same as a 50% margin?
No. A 50% markup gives a 33.3% margin. A 50% margin needs a 100% markup.
What markup do webshops use?
It depends entirely on the category, shipping costs and competition, so there is no honest single number. Work back from the margin you need after shipping, payment fees and returns, then convert it to a markup with markup = margin ÷ (1 − margin).
Try it on your own products.
Free for up to 30 products, no credit card. Founding shops get 50% off any paid plan for the first 6 months with code FOUNDING50 (first 100 shops, until 31 March 2027).