Markup percentage is the extra amount charged by a retailer on a product purchased from a manufacturer, usually based on a percentage of the cost. The appropriate markup can vary based on the industry, location, and the item being sold. Following the manufacturer’s markup or suggested price can help determine the best markup percentage. Some items, like soda and liquor, have a very high markup.
The markup percentage is the amount of money a particular item or product is marked up before it is resold. Items are usually sourced from a major manufacturer or manufacturer to a retailer or distributor. The end user or consumer purchases the products from the retailer. Since the retailer does not manufacture the products and must purchase them from the manufacturer, the retailer only makes a profit if they charge more for the product than they paid for. This additional amount charged is the markup and is usually based on a percentage.
The markup percentage is usually a percentage of the cost to purchase the item. For example, if a person has a 50 percent markup percentage and purchases the item for $10.00 US Dollars (USD), his percentage would be 50 percent of $10.00 or $5.00 USD. This would mean that the item would have to sell for $15.00 USD.
To choose the best markup percentage, first determine if there is an industry standard or a standard in your local area. The appropriate markup can vary greatly. Some experts recommend setting the retail markup at 40 percent of the cost, while others recommend setting the markup at up to 100 percent of the cost. A lot will depend on the area where the shop is located and the item is being sold. There may be a lower markup on items sold in a grocery store, for example, than there is a markup on high-end clothing or luxury brand items, which typically have a high markup.
The manufacturer that supplies the product for sale to the retailer can also help determine the best markup percentage. If the manufacturer’s markup is followed or the manufacturer’s suggested price is used, the markup percentage is likely to be closely in line with what other retailers are making. This can be beneficial, as the products sold will not be priced higher than others on the market, while profits will not be lost due to being priced too low.
Some items are also known to have a very high markup. For example, soda and liquor generally have some of the highest markups on the market. This means that they can be purchased for much less than the items sell for.
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