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Retail Markup Example

See Also:
Margin vs Markup

Retail Markup Example

Max owns a retail store called Retailco. Retailco sells clothing as well as other items common to department stores. Max’s company has just opened their doors and is still finding a place in the market. As a result, some of the essential financial ratios have not been calculated yet. Max would like to calculate his retail markup for his various selling items so that his new business can determine the retail actual retail price of the products that they are selling. These markups will serve as benchmarks for the rest of the business team in an effort to show the company’s likelihood of success. Achieve these efforts by estimating the total amount of profits by comparing the retail price of the products with the overall spending and costs of the company.

(NOTE: Want the Pricing for Profit Inspection Guide? It walks you through a step-by-step process to maximizing your profits on each sale. Get it here!)

Recently, the amount of profit made on the average pair of women’s jeans has come into question. Max, from working in the industry for years, has an intuition that he is making a profit on these products. Still, he needs to prove this to the rest of his company. Personally, he also wonders what is standard retail markup for a department store just like his.

Calculating Retail Markup

Max initially searches Yahoo for the term “retail markup calculator”. Though he does not find a function to provide his calculation, he does find a formula which will serve the purpose. Max will utilize the formula known as the retail markup formula. Because this formula takes the retail price of the cost to produce a unit of product and subtracts that price from the retail price of the product, what is left is a retail markup price.

Max sells the average pair of jeans for $15. His cost of goods sold on each unit is $10. Max uses the retail markup formula to calculate the retail markup average on his pair of jeans:

$15 – $10 = $5

Knowing his retail markups will help him to build confidence and courage in his team. He resolves to find retail markups for all of his products. As a result, he finds that this amount is standard with industry expectations.

Additionally, the retail markup percentage is calculated by taking the retail markup and dividing the value by the unit cost of the product. The fraction that remains after the calculation is known as the retail markup percentage. To learn how to price for profit, download our Pricing for Profit Inspection Guide. Easily discover if your company has a pricing problem and fix it!

Retail Markup Example

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Retail Markup Example

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Markup Definition

See Also:
Retail Markup Example
Margin vs Markup
Buyer Bargaining Power (one of Porter’s Five Forces)
Supplier Power (one of Porter’s Five Forces)
Marking-to-Market
Free Cash Flow Analysis

Retail Markup Definition

Retail markup is the difference between the price of a product and the cost of that product. Retail markup percentage is the retail markup as a percentage of a product’s unit cost. This method is commonly used to find the price of retail products which are somewhat of a commodity. Costs are fixed, and the market dictates purchasing price. Furthermore, many industries have a standard retail markup percentage which most products are sold at.

The retail markup definition is common to many products, services, and industries. Where retail sales are occurring, it is likely that someone used the retail markup calculator. It is important to note that retail markup, margin, and other comparisons of cost of goods sold and price are not the same.

(NOTE: Want the Pricing for Profit Inspection Guide? It walks you through a step-by-step guide to maximizing your profits on each side. Get it here!)

Retail Markup Formula

To find the retail Markup amount in dollars: Retail Markup = Sales price – Cost

To find the retail Markup percentage: Retail Markup = Markup amount / Retail Price

Retail Markup Calculation

For example, if a product’s unit cost is $10 and its retail price is $15, then the retail markup is $5:

Retail markup = Retail price – Unit cost = $15 – $10 = $5

and the retail markup percentage is 50%:

Retail markup percentage = (Retail markup/Unit cost) = ($5/$10) = 50%.

To learn how to price for profit, download our Pricing for Profit Inspection Guide.

Markup Definition

Strategic CFO Lab Member Extra

Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.

Click here to access your Execution Plan. Not a Lab Member?

Click here to learn more about SCFO Labs

Markup Definition

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