What Is a Good Markup Percentage for Retail Products?

You buy a product for $24 and need to price it for the shelf. Mark it up too high and customers walk. Mark it up too low and you cover the product cost but not the rent, payroll, or utilities. The right markup depends on your product category, your competitive position, and whether your customers can easily compare your price to someone else's. According to the National Retail Federation, retail profit margins averaged 3.2 percent in 2025, which means most retailers have very little room for pricing errors. Use our Markup on Cost Calculator to calculate your selling price from any cost and markup percentage.

What Is Markup Percentage?

Markup percentage is the amount you add to a product's cost, expressed as a percentage of that cost. If you buy a widget for $40 and sell it for $60, your markup is 50 percent. You added $20, which is 50 percent of the $40 cost.

The formula:

Markup % = ((Selling Price - Cost) / Cost) x 100

Markup is not the same as margin. Margin divides profit by selling price. Markup divides profit by cost. The same $20 profit on a $60 sale is a 33.3 percent margin but a 50 percent markup. Confusing the two is the most common pricing error in independent retail, and it can quietly mis-price an entire product line.

Markup vs. Margin: Why the Difference Matters

Because margin is always the smaller number on the same sale, a retailer who prices to a 50 percent markup while budgeting for a 50 percent margin is building a business on a number that is roughly 17 points optimistic. On $200,000 in annual sales, that gap is $34,000 in profit that does not exist.

The SBA recommends that small retailers model both markup and margin before setting prices. Your landlord and your payroll provider care about margin, not markup. If you set prices using markup and track performance using margin, you need to know how to convert between the two.

What Is a Good Markup by Category?

There is no single good markup. The right number depends on how easily customers can compare prices, how differentiated your product is, and what your overhead looks like.

Easily compared products like groceries and electronics tend toward thin markups. Customers can check prices on their phones while standing in your aisle. Differentiated products like apparel and cosmetics support wide markups because customers cannot easily find the exact same item at another store.

Grocery stores survive on 15 percent markup because they move high volume and have low labor costs per transaction. A jewelry store at 200 percent markup can afford it because customers buy infrequently, comparison shopping is harder, and the sales cycle involves personal service.

If your markup is below the typical for your category, you are either competing on price, which works if your volume is high enough, or you are leaving money on the table. If your markup is above the typical range, your customers need a clear reason to pay the premium.

Keystone Pricing Explained

Keystone pricing means doubling the wholesale cost, which is a 100 percent markup. If you buy a scarf for $18, you sell it for $36. This convention is common in giftware, apparel, and boutiques because it is simple to calculate and produces a 50 percent margin.

Keystone works when your overhead is moderate and your products are not easily compared. It breaks down on products with very low cost. A $2 item marked up to $4 may not cover the labor to process the sale, the shipping, or the shelf space it occupies. It also breaks down on products where customers know the wholesale price, which is increasingly common with online sourcing.

How Promotional Discounts Affect Markup

A 20 percent discount on a product with a 50 percent markup cuts your margin from 33 percent to 13 percent. A 30 percent discount on the same product puts you below break-even. Promotional discounts can erase 20 to 40 percent of intended margin, depending on your starting markup.

If you plan to run regular promotions, build the discount into your initial markup. A retailer who marks up 150 percent and discounts 20 percent still holds a 40 percent margin. A retailer who marks up 50 percent and discounts 20 percent is left with 13 percent, which will not cover overhead for most physical retail businesses.

Common Markup Mistakes

Confusing markup with margin. This is the most expensive mistake a retailer can make. A 50 percent markup gives you a 33 percent margin, not 50 percent. If your accountant asks for your target margin and you give them your markup, your financial plan is wrong from day one.

Using the same markup for every product. Different products have different price sensitivities. A 200 percent markup on a commodity item drives customers to competitors. A 50 percent markup on a differentiated, hard-to-compare item leaves profit on the table. Adjust by category and by product.

Ignoring the effect of discounts. If your business model includes regular sales, promotions, or coupon codes, your everyday markup needs to be high enough to absorb the discount without going negative on margin.

Related Tools on ProfessionCalculators.com

The Markup vs. Margin Calculator converts between the two so you always know which number you are working with. The Gross Margin Calculator measures profitability after COGS. The Profit Margin Calculator shows your bottom line after all expenses. For a broader look at pricing and profitability, see our guides on how to calculate profit margin and how to calculate contractor markup.

Frequently Asked Questions

What is a good retail markup percentage?

There is no single good markup. Grocery stores average 15 percent, apparel averages 150 percent, and jewelry averages 200 percent. The right markup depends on your product category, how easily customers can compare prices, and your overhead. Match your markup to your category benchmark, then adjust based on your competitive position and whether you run promotions.

What is keystone pricing?

Keystone pricing is doubling the wholesale cost, which equals a 100 percent markup. A product bought for $25 sells for $50. This produces a 50 percent margin and is common in giftware, apparel, and boutiques. Keystone works best for moderately priced items where customers cannot easily compare prices across stores.

Is markup the same as margin?

No. Markup divides profit by cost. Margin divides profit by selling price. A 50 percent markup gives you a 33 percent margin. A 100 percent markup gives you a 50 percent margin. Margin is always the lower number. Confusing the two leads to pricing that looks profitable on paper but loses money in practice.

How do I calculate markup from cost and selling price?

Subtract the cost from the selling price, divide by the cost, and multiply by 100. If you buy a product for $40 and sell it for $70, your markup is (($70 - $40) / $40) x 100 = 75 percent. The Markup on Cost Calculator handles this calculation automatically.

What markup do I need if I run promotions?

If you discount 20 percent regularly, you need a markup of at least 150 percent to maintain a 40 percent margin after the discount. A 50 percent markup discounted by 20 percent leaves you with only 13 percent margin, which will not cover overhead for most retail businesses. Build your promotion strategy into your initial pricing.

Conclusion

The right markup for your retail products depends on your category, your overhead, and whether your customers can comparison shop. Grocery and electronics sit at 15 percent because customers can check prices on their phones. Apparel and cosmetics support 150 percent or more because the products are differentiated and harder to compare. Whatever markup you choose, calculate the resulting margin before you commit to it, because margin is what pays your rent and payroll. Use the Markup on Cost Calculator to test different markups and see the margin each one produces.