Markup vs margin for clothing brands, with worked numbers
Markup is profit as a share of cost. Margin is profit as a share of the selling price. They describe the same profit with different denominators, so a 100% markup is only a 50% margin. Brands that price from the wrong one end up with less money than they planned.
What is the difference between markup and margin?
Markup is profit divided by cost; margin is profit divided by price. A garment that costs USD 12.01 and sells for USD 36.00 earns USD 23.99: a markup of 199.8% and a margin of 66.6%. Same money, two percentages, and the margin is always the smaller number.
Formulas
Markup = (price − cost) ÷ cost
Margin = (price − cost) ÷ price
Price from a markup = cost × (1 + markup)
Price from a margin = cost ÷ (1 − margin)
Take the same USD 12.01 garment at four prices:
| Selling price | Profit | Markup | Margin |
|---|---|---|---|
| USD 24.00 | USD 11.99 | 99.8% | 50.0% |
| USD 30.00 | USD 17.99 | 149.8% | 60.0% |
| USD 36.00 | USD 23.99 | 199.8% | 66.6% |
| USD 48.00 | USD 35.99 | 299.7% | 75.0% |
Not sure where the USD 12.01 comes from? It is the cost per garment from the worked example in the garment cost calculator, including fabric waste, trims, labor, print, packaging and overhead.
How do you convert markup to margin?
Margin = markup ÷ (100% + markup). Going the other way, markup = margin ÷ (100% − margin). So a 150% markup is a 60% margin, and a 60% margin needs a 150% markup. The tables show the common conversions, calculated rather than rounded from memory.
| Markup | Margin |
|---|---|
| 50% | 33.3% |
| 100% | 50.0% |
| 150% | 60.0% |
| 200% | 66.7% |
| 300% | 75.0% |
| Margin | Markup needed |
|---|---|
| 40% | 66.7% |
| 50% | 100.0% |
| 60% | 150.0% |
| 70% | 233.3% |
| 80% | 400.0% |
What margin does a clothing brand need?
There is no single right number, because it depends on your fees, returns and launch costs. Work backwards from the money you must recover to a price. A common rule of thumb, keystone pricing, simply doubles the cost; use it as a first guess, not a target.
At USD 12.01, doubling gives USD 24.02. The real margin at USD 24.00 is 50.0%, and that is before any fees, returns or launch costs come out of it.
How do wholesale prices change the maths?
If you sell wholesale, margin is measured on the wholesale price, not retail. At half of a USD 36.00 retail price (USD 18.00), the same USD 12.01 cost leaves USD 5.99: a 33.3% margin, against 66.6% at retail.
A price that looks comfortable at retail can be thin once a stockist buys it, so check margin at the lowest price you will actually sell at.
How do fees and launch costs change break-even?
Break-even units are fixed launch costs divided by what each unit contributes after cost, fees and other per-unit costs, rounded up. In the example below each unit contributes USD 21.91, so you need to sell 110 units before anything counts as profit.
The inputs: a USD 36.00 price, a 3% payment fee (USD 1.08 a unit), USD 1.00 of other per-unit costs and USD 2,400.00 of fixed launch costs. Revenue at break-even is USD 3,960.00, which is not profit. The fee and fixed-cost figures are made up to show the method; use your own in the calculator.
What mistakes make clothing prices too low?
- Treating markup as margin. Aiming for "50%" and applying it as markup gives a 33.3% margin.
- Leaving out fabric waste. Cost per garment should include the fabric you cut away. The costing formula adds it explicitly.
- Ignoring fees. Payment and marketplace fees come off the price, not the cost.
- Forgetting wholesale. Check margin at the lowest price you will actually sell at.
- Not counting launch costs. Samples, photography and set-up need a break-even, not a hope.
None of this covers returns, discounts, tax or freight. The calculator says so on the page, and so should any price you set from it.