What is margin in fashion retail and wholesale?
The difference between selling price and cost, expressed as a percentage of the selling price.
In short
Margin is the difference between a product's selling price and its cost, expressed as a percentage of the selling price. It shows how much of each sale remains to cover overheads and profit.
How does it work in practice?
To calculate gross margin, subtract the cost of the product from the selling price, then divide the result by the selling price. Retailers calculate margin on what they pay the brand, while brands calculate it on their landed cost. Teams track intake margin at the time of buying and achieved margin after markdowns, and analyse both by category, brand and channel.
Why does it matter?
Margin determines whether a business can pay for stores, staff, marketing and logistics, and still make a profit. Buyers use target margins to decide which brands and products to stock, and brands set wholesale prices so that retailers can reach their target margin at the RRP. Because markdowns reduce achieved margin, accurate buying is as important as the initial price structure.
How is AI changing it?
AI helps protect margin at several points. Pricing models recommend prices that balance volume and profitability, while markdown optimisation limits margin loss at the end of the season. During buying, AI tools forecast achieved margin for different assortment choices, not just intake margin, so buyers can see the likely impact of slow sellers before committing.
Common pitfalls
- Confusing margin with markup, which use different bases and give different percentages.
- Focusing on intake margin while ignoring markdowns and returns.
- Comparing margins across channels without allocating channel costs properly.
- Chasing high margin products that sell too slowly to be profitable overall.
Frequently asked questions
What is the difference between margin and markup?
Margin is profit as a share of the selling price. Markup is profit as a share of the cost, or the multiplier applied to cost to reach the selling price.
What is the difference between intake margin and achieved margin?
Intake margin is calculated at full price when stock is bought. Achieved margin reflects the prices actually realised, including markdowns and promotions.
