They describe the same dollar of profit, but divide it by different numbers — and mixing them up is one of the most expensive mistakes in retail pricing. Here's the distinction, the conversion table, and how to price with each.
Markup and margin measure the same profit against different bases. See the conversion table (a 33.3% markup equals a 25% margin), the formulas, and case studies for e-commerce, dropshipping, and retail.
See also: Percentage calculator · Formula cheat sheet
Both start from the same profit: selling price − cost. They differ in what they divide it by.
(Sell − Cost) ÷ Cost × 100. It answers "how much did I add on top of what I paid?"(Sell − Cost) ÷ Sell × 100. It answers "what slice of each sale is profit?"Because the selling price is always larger than the cost, dividing by the sell price gives a smaller number. Margin is always lower than markup for the same product.
Buy for $40, sell for $60. Your profit is $20 either way.
Same $20, two percentages. A supplier saying "50% markup" and a finance report saying "33% margin" can be describing the identical transaction.
| Markup (on cost) | Margin (on price) |
|---|---|
| 10% | 9.09% |
| 15% | 13.04% |
| 20% | 16.67% |
| 25% | 20.00% |
| 33.3% | 25.00% |
| 50% | 33.33% |
| 60% | 37.50% |
| 100% (keystone) | 50.00% |
| 150% | 60.00% |
| 200% | 66.67% |
The classic retail "keystone" markup of 100% (doubling the cost) is exactly a 50% margin.
You never need to memorize the table — two formulas convert either direction (use decimals, e.g. 50% = 0.5):
margin = markup ÷ (1 + markup). A 0.50 markup → 0.50 ÷ 1.50 = 0.333 = 33.3%.markup = margin ÷ (1 − margin). A 0.25 margin → 0.25 ÷ 0.75 = 0.333 = 33.3%.Most businesses plan around margin (it maps directly to profitability) but buy at cost. To hit a target margin, don't multiply cost by the margin — divide:
Selling price = Cost ÷ (1 − target margin)
Cost $40, target 40% margin: 40 ÷ (1 − 0.40) = 40 ÷ 0.60 = $66.67. (That's a 66.7% markup — multiplying $40 by 1.40 would have given only $56, a 28.6% margin, well short of target.)
E-commerce. A product costs $40 landed and you want a 40% margin to cover platform and shipping. Price at $66.67 (round to $66.99). Track margin, not markup, so the percentage lines up with your P&L.
Dropshipping. Your "cost" isn't just the supplier price — payment processing (~3%) and ad spend per order can be your biggest costs. Fold them into the cost figure before applying markup, or a healthy-looking markup can still lose money after fees.
Retail inventory. Keystone pricing (100% markup = 50% margin) is the traditional default, giving room for markdowns while protecting margin. Categories with high turnover often run lower markups; slow-moving specialty goods run higher.
No. A 50% markup is a 33.3% margin. Markup divides profit by cost; margin divides the same profit by the (larger) selling price, so margin is always the smaller number.
Divide the markup by one plus the markup: margin = markup / (1 + markup). A 50% (0.5) markup becomes 0.5 / 1.5 = 33.3% margin.
No — divide. Selling price = cost / (1 - target margin). For a 40% margin on a $40 cost, price = 40 / 0.60 = $66.67. Multiplying by 1.40 would undershoot the target.
Keystone means doubling the cost — a 100% markup. Because you divide the same profit by the doubled price, that equals exactly a 50% margin.
Links point to primary sources and standards bodies. Tax rates and official formulas change over time — verify against the source for current figures.