Margin Calculator: Gross Margin and Markup for Retail
Enter the cost and the selling price to get the gross margin, the markup and the profit per unit; add a target margin to get the price that delivers it. Margin divides profit by the selling price, markup divides it by cost, so the same product always shows two different percentages.
Margin = (price − cost) ÷ price. Markup = (price − cost) ÷ cost. Price for a target margin = cost ÷ (1 − target margin).
The numbers stay in your browser and are not sent anywhere.
How to Use the Margin Calculator
- Enter the cost per unit. For retail I use landed cost: the purchase price plus freight, duty and agent fees.
- Enter the selling price without VAT. A price that includes VAT makes the margin look higher than it is.
- Read the gross margin, the markup and the gross profit per unit.
- To price a new product, enter the target margin and read the price that delivers it, then round it to a price point on your ladder.
Gross Margin and Markup Formulas
Both percentages use the same gross profit. The only difference is the number you divide by. Markup can be above 100%, gross margin cannot. To convert one into the other without cost or price, use margin = markup ÷ (1 + markup) and markup = margin ÷ (1 − margin), with both written as decimals. I explain the difference in more detail, with a conversion table and intake versus achieved margin, in my article on markup vs margin in fashion retail.
Margin Calculator Worked Example for a Jacket
Take an illustrative jacket with a landed cost of 20 and a selling price of 50, both excluding VAT. The gross profit is 30. The gross margin is 30 ÷ 50 = 60% and the markup is 30 ÷ 20 = 150%. If the buyer wants a 65% margin on the same cost, the price has to be 20 ÷ 0.35 = 57.14, which in practice becomes 57 or 59 depending on the price architecture. After rounding, check the margin again with the calculator.
| Selling price | Gross margin | Markup |
|---|---|---|
| 30 | 33.3% | 50% |
| 40 | 50% | 100% |
| 50 | 60% | 150% |
| 60 | 66.7% | 200% |
Common Mistakes with Margin and Markup Calculations
- Adding the target margin to cost: 20 plus 60% is 32, which is a 37.5% margin, not 60%.
- Calculating margin on prices that include VAT.
- Using the supplier price instead of landed cost, so freight and duty quietly reduce the real margin.
- Quoting “60%” in a pricing file without saying whether it is margin or markup.
- Averaging product margins instead of dividing total gross profit by total sales.
Margin Calculator FAQ
Subtract the cost from the selling price and divide the result by the selling price. A product bought at 20 and sold at 50 has a gross margin of 30 ÷ 50 = 60%. Use prices without VAT.
Subtract the cost from the selling price and divide the result by the cost. The same product bought at 20 and sold at 50 has a markup of 30 ÷ 20 = 150%. Markup is what buyers add to cost when they set a price.
Divide the cost by one minus the margin: cost ÷ 0.4. For a cost of 20 the price is 50 before VAT. Round it to a price point that fits your range and check the margin again.
Markup divides the profit by cost, which is always smaller than the selling price, so the percentage is higher. A 100% markup equals a 50% margin. The two only look similar at low markups.
The maths is the same for any product, but the labels and advice are written for retail. In fashion I recommend landed cost and prices net of VAT, and a separate check of the margin achieved after markdowns.
Related Retail Analytics Articles
Retail Pricing Strategy for Fashion Brands: Methods and Examples
Cost-plus, competitive, value-based, psychological and promotional pricing: how fashion brands choose a retail pricing strategy per category.
How to Build and Read a Retail Price Architecture Before the Season
Entry, core and top price points, good-better-best tiers and how to spot a gap in the price ladder before the buy is placed.
Markdown Strategy in Fashion Retail: When and How Deep to Discount
How to calculate a markdown, time it by sell-through and choose a discount depth that clears stock without giving away more margin than needed.
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