How markup pricing works
Markup pricing starts from what an item costs you and adds a percentage on top. It's the simplest way to price stock, which is why wholesalers, distributors and many shops use it. The risk is forgetting that the percentage is calculated on cost, not on the selling price.
Selling price = cost × (1 + markup)
Margin = markup ÷ (1 + markup)Worked example
Markup to margin at a glance
| Markup on cost | Equivalent margin | Where you might see it |
|---|---|---|
| 10–20% | 9–17% | Wholesale, groceries, electronics |
| 50% | 33% | General retail |
| 100% ("keystone") | 50% | Clothing, gifts, cosmetics |
| 200–300% | 67–75% | Restaurants (on food cost), handmade goods |
Choosing a markup
A markup that looks generous on paper can still lose money once you add costs the item price doesn't cover: shop rent, staff, electricity, wastage, discounts, returns and marketplace commissions. Work from the margin you need to cover those costs, then convert it to a markup:
Markup = margin ÷ (1 − margin)
e.g. a 40% margin needs a 66.7% markupSelling on Amazon, Flipkart, Meesho, Swiggy or Zomato? Commissions of 15–30% come off your selling price, so your markup must cover them. The product pricing calculator includes platform fees and GST. To go from a target margin straight to a price, use the profit margin calculator.
Keystone pricing and when it fails
Many shops use "keystone" pricing: double the cost (100% markup, 50% margin). It's simple and often works for fashion and gifts. It fails when costs are unusual: a slow-moving item ties up money and shelf space, so it needs a bigger markup; a fast-moving essential can sell on a thin one. Price each category on its own economics, not one blanket percentage.
Frequently asked questions
Is 100% markup the same as 100% profit margin?
No. A 100% markup doubles the cost, which is a 50% margin. A 100% margin is impossible, since it would mean the item cost nothing.
Should I calculate markup before or after GST?
Before. Apply markup to your cost excluding GST (if you claim input credit), then add output GST on the selling price.
What markup do restaurants use?
Restaurants often price dishes at 3–4 times the food cost (200–300% markup) to cover rent, staff and utilities.