Pricing guide
Margin vs. Markup: The Pricing Difference Sellers Must Know
A practical explanation of why a 50% markup is not a 50% margin, with examples for small sellers.
The short answer
Margin compares profit with selling price. Markup compares profit with product cost. Because the denominator changes, the percentages are never interchangeable unless profit is zero.
For a product that costs $40 and sells for $60, profit is $20. The markup is 50% because $20 is half of cost. The margin is 33.33% because $20 is one-third of revenue.
Why sellers confuse them
Suppliers often discuss markup while operators track margin. Entering a target margin as if it were markup produces a price that is too low. At a $40 cost, adding a 40% markup creates a $56 price, but a true 40% margin requires $66.67 before marketplace and payment fees.
A practical pricing check
Start with landed product cost, not the factory invoice alone. Add channel fees, fulfillment and expected variable costs before deciding whether gross margin is enough to support advertising, overhead and returns. Record whether each percentage in your spreadsheet is margin or markup.
Test the numbers
Use your own current costs and keep a dated note for every marketplace fee, carrier rule or operating assumption that may change.