Markup refers to the difference between the cost of a product and its selling price. It’s essentially the amount added to the cost of goods to cover expenses and generate profit. In the context of e-commerce, understanding and managing markup is crucial for setting competitive prices that attract customers while ensuring your business remains profitable. When you purchase products for your webshop, you pay a certain cost per item. To make a profit, you need to sell the product for more than it costs you to buy it. The amount you add to the original cost is the markup. Setting the right markup is essential to maintaining a healthy profit margin. Too low, and you might struggle to cover costs; too high, and you risk losing customers to competitors with more attractive pricing. By carefully calculating and adjusting markup, you can strike a balance that maximizes profitability while staying competitive in the market.
For example, if a product costs you $10, and you sell it for $15, the markup is $5. In this example, the markup percentage would be 50%.
