What is the difference between margin and markup?

Margin is profit as a percentage of selling price. Markup is profit as a percentage of cost. On a $20 cost and $50 price: margin = 60%, markup = 150%. They use the same dollar profit ($30) but divide by different bases (price vs. cost).

Should I use margin or markup for pricing?

Use markup when setting prices from cost (it's intuitive: "I want to mark this up 2x"). Use margin when evaluating profitability (it tells you what percentage of revenue you keep). Never confuse the two — a "50% markup" only gives you a 33.3% margin.

What is a good gross margin for Shopify?

For physical products, target 40–60% gross margin. This leaves room for payment fees (3%), shipping (5–10%), ads (10–20%), and fixed costs while maintaining 15–30% net margin. Below 30% gross margin is risky for physical goods.

What is keystone pricing?

Keystone pricing means doubling your cost — a 100% markup that produces a 50% gross margin. It's the simplest pricing strategy and is widely used in retail. For $20 cost, keystone pricing gives a $40 selling price.

How do I convert margin to markup?

Markup = Margin ÷ (1 − Margin). For example, to achieve a 60% margin: Markup = 0.60 ÷ 0.40 = 1.5 = 150%. So a 60% margin requires a 150% markup. Use the conversion table above for quick reference.

Why does my profit margin look lower than expected?

Check whether you're calculating margin (÷ price) or markup (÷ cost). A 50% markup only produces a 33.3% margin. Also ensure you're including all costs: COGS, payment fees, shipping, ads, and returns. Many sellers calculate margin on price minus COGS only, ignoring operational costs. - Shopify Profit Calculator - Etsy Profit Calculator - Amazon Profit Calculator - Dropshipping Profit Calculator - eBay ROI Calculator

Shopify Margin Calculator: Gross Margin vs Markup Explained

Gross margin and markup are two different ways to express the same profit. On a product that costs $20 and sells for $50, the gross margin is 60% and the markup is 150%. Confusing these two metrics leads to systematic underpricing — a 50% markup only gives you a 33.3% margin. This calculator shows both values so you can price correctly and evaluate profitability accurately.

The Difference: Margin vs Markup
Calculation Formulas
How to Use the Calculator
Worked Examples
Pricing Strategy: Keystone and Beyond
Margin to Markup Conversion Table
Frequently Asked Questions

The Difference: Margin vs Markup

Gross margin expresses profit as a percentage of the selling price. It answers: "What percentage of my revenue is profit?"

Markup expresses profit as a percentage of the cost. It answers: "How much did I mark up the cost to arrive at the price?"

Both use the same dollar amount (Selling Price − Cost), but divide by different bases. This produces different percentages:

$20 cost, $50 price → Profit = $30
Gross Margin = $30 ÷ $50 = 60%
Markup = $30 ÷ $20 = 150%

The critical mistake: A seller who wants a "50% margin" and applies a "50% markup" to a $20 product prices it at $30. But $30 − $20 = $10 profit, and $10 ÷ $30 = only 33.3% margin — not the 50% they intended. They've underpriced by $10 per unit.

Calculation Formulas

Gross Margin = ((Selling Price − Cost) ÷ Selling Price) × 100

Markup = ((Selling Price − Cost) ÷ Cost) × 100

To find price from a target margin: Selling Price = Cost ÷ (1 − Margin)

To find price from a target markup: Selling Price = Cost × (1 + Markup)

How to Use the Calculator

Enter your Selling Price — the price customers pay
Enter your Product Cost — the cost to produce or purchase the item
Click Calculate Margin to see both gross margin and markup

The calculator returns both values simultaneously. Use gross margin to evaluate profitability, and markup to set prices from cost.

Worked Examples

Example 1: T-Shirt (Cost $8, Price $25)

Metric	Calculation	Result
Dollar Profit	$25 − $8	$17
Gross Margin	$17 ÷ $25	68%
Markup	$17 ÷ $8	212.5%

A 68% gross margin on a t-shirt is excellent. This leaves room for payment fees ($0.73), shipping ($3–5), and ads ($3–5) while maintaining a 30–40% net margin.

Example 2: Electronics Accessory (Cost $35, Price $50)

Metric	Calculation	Result
Dollar Profit	$50 − $35	$15
Gross Margin	$15 ÷ $50	30%
Markup	$15 ÷ $35	42.9%

A 30% gross margin on electronics is tight. After payment fees ($1.75), shipping ($4), and ads ($7.50), net margin drops to about 3.5% — barely profitable. This product needs a price increase.

Example 3: Digital Course (Cost $0, Price $99)

Metric	Calculation	Result
Dollar Profit	$99 − $0	$99
Gross Margin	$99 ÷ $99	100%
Markup	∞	N/A

Digital products have 100% gross margin (no COGS). The only costs are payment fees and marketing, making net margins typically 70–90%.

Pricing Strategy: Keystone and Beyond

Keystone Pricing — Double the cost (100% markup, 50% margin):

$20 cost → $40 price
Simple to calculate, widely used in retail
Produces a 50% gross margin

Premium Pricing — 2.5x to 3x cost (150–200% markup, 60–67% margin):

$20 cost → $50–$60 price
Better for products with high perceived value
Leaves more room for ads and promotions

Cost-Plus Pricing — Cost + fixed dollar amount:

$20 cost + $15 = $35 price
Simple but doesn't account for market demand
Produces a 42.9% margin

Value-Based Pricing — Price based on customer perception, not cost:

$20 cost → $80 price (if customers perceive $80 value)
Maximizes profit when brand and differentiation are strong
Requires market research

Margin to Markup Conversion Table

Target Margin	Required Markup	Example ($20 cost)
20%	25%	$20 → $25
30%	42.9%	$20 → $28.57
40%	66.7%	$20 → $33.33
50%	100%	$20 → $40
60%	150%	$20 → $50
70%	233%	$20 → $66.67
80%	400%	$20 → $100

Use this table when setting prices: find your target margin in the left column, apply the corresponding markup to your cost, and you'll get the correct selling price.

Formula for conversion:

Markup = Margin ÷ (1 − Margin)
Margin = Markup ÷ (1 + Markup)