The two formulas
Markup % = (Retail − Cost) ÷ Cost
Margin % = (Retail − Cost) ÷ Retail
Same numerator, different denominator. Markup measures profit against what you paid; margin measures it against what you charge. Because retail is the bigger number, the margin percentage is always lower than the markup percentage for the same product.
A worked example
You buy an item for $10 and sell it for $20.
- Markup: ($20 − $10) ÷ $10 = 100%
- Margin: ($20 − $10) ÷ $20 = 50%
Same $10 of profit. Quote “100%” to a banker expecting margin and you’ve overstated profitability by double. This is why buying and finance teams should always be explicit about which one they mean.
Keystone pricing
Keystone is the old retail shorthand for doubling cost to set retail — a 100% markup, or a 50% margin. It’s a convenient starting point, not a law: fashion and accessories often price well above keystone, while commodity and electronics categories frequently sell below it. Treat keystone as the anchor you adjust from based on demand, brand, and competition.
Initial markup (IMU)
IMU % = (Initial Retail − Cost) ÷ Initial Retail
Initial markup is the margin built into your first-ticket price. Crucially, you set it higher than the margin you actually need, because reductions are coming — markdowns, promotions, employee discounts, and shrinkage. IMU is the cushion that lets all of those happen and still leave a healthy maintained margin.
Maintained markup (MMU)
Maintained markup is what you actually keep after all those reductions:
Maintained Markup < Initial Markup (always)
If you need a 50% maintained margin and you expect 15 points of markdowns and shrink across the season, your initial markup has to be set meaningfully higher than 50% to land there. Planning IMU without planning the reductions is the classic margin miss.
Don’t forget landed cost
Every markup and margin number is only as honest as the “cost” you feed it. Freight, duties, and handling can add real points to the true cost of a unit, so price off landed cost, not just the wholesale invoice, or your margins will quietly run below plan.
Markup, margin, and GMROI
Margin is half of the profitability story; velocity is the other half. A strong margin on a product that never sells is a poor investment. That’s why buyers pair margin with GMROI, which puts margin dollars over the inventory dollars tied up to earn them.
Markup and margin in Vendee Pro
Vendee Pro’s Report Studio reports on margin across categories, vendors, and sources, and purchase orders capture per-line landed cost (wholesale plus shipping-per-unit) so the cost basis behind every margin number reflects what the unit truly cost to put on the shelf. Reports →
Frequently asked questions
What’s the difference between markup and margin?
Markup is profit as a percentage of cost; margin is the same profit as a percentage of the retail price. A product bought at $10 and sold at $20 has a 100% markup but a 50% margin — the same dollars against different bases.
What is keystone pricing?
Keystone means doubling cost to set retail, which is a 100% markup and a 50% margin. It’s a common starting point, though many categories price above or below keystone.
What is initial markup (IMU)?
The planned difference between your first-ticket retail and cost, as a percentage of retail. It’s set high enough to absorb markdowns, shrinkage, and discounts and still leave the maintained margin you need.
What is maintained markup?
The margin you actually keep after markdowns, employee discounts, and shrinkage. It’s always lower than initial markup, which is why buyers plan IMU above their target maintained margin.
Price for the margin you actually keep.
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