"I'm making 50% on these." Ask a few resellers what they mean by that and you'll get different answers. Some mean they sell for 50% more than they paid. Some mean half of every sale is profit. Those are very different businesses, and the difference is margin versus markup.
Same profit, different denominator
Both numbers start with profit: what you sold it for minus what it cost you.
profit = price − cost
margin = profit ÷ price
markup = profit ÷ cost
Buy an item for $12, sell it for $20. Profit is $8.
- Margin is $8 ÷ $20 = 40%. You keep 40 cents of every dollar of sales.
- Markup is $8 ÷ $12 = 67%. You sold it for 67% more than you paid.
Margin can never reach 100%, because profit can never be bigger than the price. Markup has no ceiling. A 300% markup is just a 75% margin.
Conversion table
| Markup | Equals margin of | Price as multiple of cost |
|---|---|---|
| 25% | 20% | 1.25x |
| 50% | 33% | 1.5x |
| 100% | 50% | 2x |
| 150% | 60% | 2.5x |
| 200% | 67% | 3x |
| 300% | 75% | 4x |
margin = markup ÷ (1 + markup)
markup = margin ÷ (1 − margin)
Why sellers should think in margin
Marketplace fees are a percentage of the sale price. So are payment processing fees, eBay promoted listing rates, and Amazon's ACoS. Margin is also a percentage of the sale price. That means they stack cleanly. If Amazon takes 15% and you want 25% left, everything else has to fit in 60% of the price. You can see that at a glance.
Markup doesn't line up with fees. A "100% markup" on a $10 item means a $20 price. Amazon's 15% referral fee takes $3, FBA takes about $4.76, and suddenly your $10 profit is $2.24. The markup didn't change. The business did.
Gross margin vs net margin
When a supplier or a guru says a product has "60% margins," they almost always mean gross margin: price minus the cost of the item, divided by price. That ignores everything that happens between buying the item and getting paid for it.
For a reseller, the number that matters is net margin per unit: what's left after the item, shipping, marketplace fees, fulfillment, storage, packaging, ads, and returns. It's common for a product with a 60% gross margin to have a 15% net margin. Here's how that happens on a $20 FBA item that costs $8 landed:
Net margin: about 10%. Same product, a sixth of the "margin."
What's a good margin?
There's no universal number, but these are reasonable ways to think about it for product resellers:
- Net margin under 10%: fragile. One price war, fee change, or batch of returns and the product loses money. Only worth it at high volume or as a deliberate traffic builder.
- 15% to 30%: healthy for most marketplace products. Enough to absorb surprises and fund ads.
- Over 30%: great, and usually means you have something competitors don't: a brand, a bundle, a sourcing advantage, or less competition.
Margin also has to be read alongside how fast things sell. A 12% margin on an item that sells every day can earn more than a 40% margin on one that sells once a month, and it ties up less cash in inventory.
Where markup is still useful
Markup is a fast screen when you're sourcing. Because FBA and WFS fees often take 30% to 40% of the price, a lot of sellers won't consider an item unless they can sell it for about 3x their landed cost (a 200% markup). At 3x, after fees, there's usually enough left for a decent margin. At 2x on a cheap item, there usually isn't.
It's a quick filter, not a decision. Once something passes, run the real numbers in the break-even calculator or the FBA fee calculator.
Questions people ask
What is the difference between margin and markup?
Both use the same profit (price minus cost). Margin divides profit by the price. Markup divides profit by the cost. Buying at $12 and selling at $20 is a $8 profit, a 40% margin and a 67% markup.
What is a good profit margin for an Amazon or eBay seller?
After every cost including fees, shipping, ads, and returns, a net margin of 15% to 30% is a healthy target for most product sellers. Under 10% leaves very little room for a bad month, a price drop, or an unexpected fee.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 100% markup is a 50% margin. A 50% markup is a 33% margin.
Is 3x cost a good rule for sourcing?
It's a common starting rule for FBA and WFS, because fees often take 30% to 40% of the price. Selling at 3x your landed cost usually leaves a reasonable margin after fees. It's a screen, not a substitute for running the full numbers.