Quick answer
Markup is profit divided by cost. Margin is profit divided by selling price.
Because the denominator changes, the percentages are not equal. A 50% markup on cost produces a 33.3% gross margin before additional percentage fees.
Why the difference matters
The same dollar profit produces two different percentages.
If an imported product costs $18 landed and sells for $27, the profit before selling-channel costs is $9 per unit. The markup is $9 ÷ $18 = 50%. The margin is $9 ÷ $27 = 33.3%.
When a buyer says “I need 40% profit,” the number is ambiguous unless the business specifies whether it means markup or margin.
Worked imported-product example
Start from the all-in cost, not just the supplier price.
- Supplier cost
- $12.50
- Freight / unit
- $1.80
- Duty / tax / unit
- $0.75
- Fulfillment / unit
- $2.20
- Other fixed cost
- $0.75
- All-in cost
- $18.00
- Selling price
- $27.00
- Profit / unit
- $9.00
- Markup
- 50.0%
- Margin
- 33.3%
If the business applies markup only to the $12.50 supplier price while freight and fulfillment are ignored, the calculated selling price can be too low to support the intended profit.
Conversion
Useful markup-to-margin relationships.
A 25% markup is a 20% margin. A 50% markup is a 33.3% margin. A 100% markup is a 50% margin.
Percentage selling fees
Marketplace fees create another layer.
If a marketplace charges 10% of selling price, that fee is not automatically covered by a 50% markup on landed cost. Percentage fees should be modeled from the selling price itself.
For margin-driven pricing with percentage fees, use the Target Selling Price Calculator.
Common mistakes