Let’s have a look at what the commercial margin and the markup are and how they vary. Both of them represent the difference between the selling price and the purchase one. They are the same thing whether intended as an absolute value, on the contrary they become totally different as percentage value.
But how much do they vary?. Having a look at the graphic below, we can notice that as the margin increases the markup raises indefinetly!. The reason is that the markup represents the percentage between the sell and the purchase whereas the markup is the percentage increase of the purchase price (for further explanation, have a look to the article).
Now we proceed with some examples for a better explanation of these concept. We postulate that a retailer purchases 40 euros product and is going to sell this item at a price which enables to get a 10, 20, 30…up to 90 % margin.
As you can see in this sets of pictures (click on the images to enlarge), we have a product purchased at 40 euros and sold in order to get a 10%, 20%, 30%, 40%, 50%, 60%, 70%, 80%, 90% margin. Let’s have a look at the price you have to sell the item and how the markup vary as the margin increases. If the margin is low, the markup will be almost the same, but when the margin starts increasing, the markup grows dramatically. It is very important to know exactly what I mean when I talk about “profit”: “when I sell a product at a price of 80 euros and I suppose to get a 50% of profit”, you hve to be sure of what you mean because you have very different values to deal with.
M&R app may become a useful and quick to work your calculation out. Easy, simple, functional, avaible in a free version too.