What is markup in fashion pricing?
The amount added to cost to reach a selling price, expressed as a percentage of the cost or as a multiplier.
In short
Markup is the amount added to a product's cost to reach its selling price, expressed either as a percentage of cost or as a multiplier. Fashion brands and retailers use markup to build their price structure from cost to wholesale price and on to retail price.
How does it work in practice?
Fashion businesses often think in multipliers. A brand multiplies its landed cost by a target factor to set the wholesale price, and the retailer multiplies the wholesale price by its own factor to reach the retail price. Expressed as a percentage, markup is the difference between selling price and cost divided by the cost. Different factors may apply by market, currency or channel.
Why does it matter?
Markup is a simple, practical way to set prices consistently across a large collection. It ensures every product contributes enough to cover overheads and profit. Because markup and margin describe the same gap from different bases, misunderstanding them is a common source of pricing errors and difficult negotiations. Clear markup rules help sales teams explain wholesale prices and RRPs to retail partners.
How is AI changing it?
AI is moving pricing beyond fixed multipliers. Models analyse competitor prices, price sensitivity and product attributes to recommend prices that a fixed factor would miss, for example where customers would pay more for a distinctive piece. Brands still use markup as a guardrail, but AI helps fine-tune individual prices and price points across markets.
Common pitfalls
- Mixing up markup and margin percentages in negotiations.
- Applying the same multiplier to every product regardless of demand.
- Ignoring currency effects and duties when setting market prices.
- Forgetting that the retailer's markup must still reach the intended retail price.
Frequently asked questions
How do you calculate markup?
Subtract the cost from the selling price and divide by the cost. As a multiplier, divide the selling price by the cost.
Why is markup always higher than margin?
Both use the same profit amount, but markup divides it by the cost while margin divides it by the larger selling price. That makes the markup percentage higher.
