Calculate and convert your markup factor
Markup factor, markup and margin say the same thing in three languages. Enter one figure, read off the other two, with a conversion table.
Calculator
Factor = net sales price divided by purchase price. Markup = (factor minus 1) times 100. Margin = (1 minus 1 divided by factor) times 100.
| Factor | Markup | Margin | Sales price net at €40 purchase price |
|---|
What is the markup factor?
The markup factor is the number you multiply the purchase price by to get the net sales price. A factor of 1.8 means: a 40 euro purchase price becomes 72 euros net. It is popular in retail because you can calculate it in your head and set it for a whole product group at once.
The factor already contains the markup: factor minus 1, times 100, gives the markup in percent. And the margin, the share of the sales price, is 1 minus 1 divided by the factor. At 1.8, that is an 80 percent markup and a 44.4 percent margin.
Deriving the factor from a target margin
It works the other way round too: factor = 1 divided by (1 minus target margin). If you want a 40 percent margin, you need a factor of 1.67. Anyone who instead adds a 40 percent markup, in other words uses factor 1.4, ends up with only a 28.6 percent margin. This mix-up is the most common pricing mistake in online retail.
What do you need the factor for?
Product-group factors
One factor per category instead of per item: 1.4 for electronics, 2.0 for accessories, 2.5 for your own brands. That keeps pricing consistent even across a thousand items.
Wholesaler price lists
When importing from a wholesaler, the factor is the simplest pricing rule: the purchase price from the feed times the factor equals the sales price, recalculated automatically on every price change.
Building in fees
On marketplaces, the factor has to carry the commission too. A 12 percent fee at factor 1.5 leaves only 21 of the 33 percent margin. The margin calculator works out the rest.
A factor of 1.4 sounds like 40 percent. It is actually a 28.6 percent margin. Mix that up, and you sell too cheaply for a whole year.
The factor as a pricing rule in the shop
In Import2Shop you set the factor as a pricing template per supplier or product group, along with a rounding rule, a minimum price and, optionally, the manufacturer’s RRP as an upper limit. Every imported product gets its sales price from that, and when the wholesaler changes the purchase price, the rule recalculates it. Details are on the pricing page. Work out shipping, fees and returns with the margin calculator, and the cost of your own warehouse with the inventory carrying cost calculator.
Frequently asked questions about the markup factor
How do I calculate the markup factor?
Net sales price divided by net purchase price. 72 euros divided by 40 euros gives a factor of 1.8.
How do I convert the markup factor into a margin?
Margin = (1 minus 1 divided by the factor) times 100. A factor of 1.8 gives 44.4 percent, a factor of 2.0 gives 50 percent.
What is the difference between the markup factor and the markup?
The markup is the percentage added to the purchase price, the factor is the same calculation as a multiplier. An 80 percent markup is a factor of 1.8.
What markup factor is typical in online retail?
Depending on the product group, between 1.3 and 2.5. Electronics sit at the lower end, fashion, accessories and own brands at the upper end. What matters is what is left after fees, shipping and returns.
Do I apply the factor to the net or gross price?
To the net price. VAT is only added to the sales price afterwards. The calculator shows both.
Can I apply the factor automatically to all of a wholesaler's items?
Yes. In Import2Shop you set the factor as a pricing rule for the supplier, and every imported product, and every price change, is calculated with it automatically.
Pricing rules per supplier and product group, rounding included, automatically current on every purchase price change.
