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Margin vs markup: why 50% markup is not 50% margin

MarginsPricing·4 min read·Updated 10 August 2026

Two sellers describe the same product. One says he works on 50% markup, the other on 50% margin. They are not describing the same price, and the gap between them is larger than most people expect.

The difference in one line

  • Markup is measured against what you paid.
  • Margin is measured against what you sold for.

Same profit, different denominator — and that changes everything.

Worked through

Buy at 100, sell at 150. Profit is 50.

markup = 50 / 100 (cost)     = 50%
margin = 50 / 150 (selling)  = 33.3%

A 50% markup is only a 33% margin. If you actually want a 50% margin on a cost of 100, you have to sell at 200 — a 100% markup.

The conversion, if you need it

margin from markup:  margin = markup / (1 + markup)
markup from margin:  markup = margin / (1 - margin)

  25% markup -> 20.0% margin
  50% markup -> 33.3% margin
 100% markup -> 50.0% margin
 200% markup -> 66.7% margin

Note how the two diverge as they grow. At small numbers they are close enough that the error hides; at the levels marketplace sellers actually work with, it does not.

Why it matters more on a marketplace

In plain retail, mixing these up costs you a few points of expected profit. On a marketplace, it stacks on top of the returns and RTO problem: you were already counting revenue on orders that came back, and now the margin you thought you had on the successful ones is a third smaller than you believed.

Those two errors compound in the same direction, which is why the gap between the spreadsheet and the bank balance is so often much larger than a seller can account for.

Which one should you use?

Use margin. It is measured against revenue, which is the same base your other costs are measured against, so it composes cleanly with advertising, shipping and returns as percentages. Markup only tells you about one product line in isolation.

The Meesho price and profit calculator reports margin on settlement, not markup, for exactly this reason — and the break-even calculator takes a target margin and gives you the price that reaches it.

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