How is retail gross margin calculated?

Subtract delivered cost from net selling price, then divide by net selling price and multiply by 100. At the defaults, 39.99 minus 27.40 is 12.59, and 12.59 ÷ 39.99 × 100 gives 31.48%.

What is the difference between margin and markup?

Margin divides dollars by price; markup divides the same dollars by cost. A 31.48% margin is a 45.95% markup, so a supplier asking for cost plus 30% is not asking for a 30% margin.

How do I price to hit a target margin?

Divide delivered cost by one minus the target margin as a fraction. For a 30% target and 27.40 delivered cost, divide 27.40 by 0.7 to get 39.14, then round to a retail friendly price.

Why is the cost ceiling not the same as delivered cost?

The ceiling is the highest cost the current price can carry at the target margin. Delivered cost above it produces a negative gap, which tells you to raise price, cut cost, or lower the target.

Consumer Goods & Durable Products Manufacturing calculator

Retail Margin Impact Calculator

Turn a retail price and delivered cost into gross margin dollars, margin percent and the gap to your target. The page also prices your target margin and shows the cost ceiling it allows.

What this calculator does

Retail gross margin from price and delivered cost, plus the price and cost ceiling that hit your target.

Formula used

Margin dollars per unit = net selling price − delivered cost
Gross margin = margin dollars ÷ net selling price × 100
Margin gap = gross margin − target gross margin
Price to hit target = delivered cost ÷ (1 − target margin ÷ 100)
Cost ceiling for target = net selling price × (1 − target margin ÷ 100)

Inputs explained

Net Selling Price per Retail Unit: Price the retailer pays after discounts and allowances.
Delivered Cost per Retail Unit: Landed cost including freight, duty and packaging.
Target Gross Margin: Margin share of price the product must deliver.

How to use the result

Best suited to checking a promo price against the margin floor, evaluating a delivered cost increase, pricing a private label pack.
Excludes retailer allowances, slotting fees and returns that reduce net price. A margin target above 99% is not modeled because price explodes toward infinity. Cost changes below the ceiling may still fail other product-level tests.

Common questions

How is retail gross margin calculated? Subtract delivered cost from net selling price, then divide by net selling price and multiply by 100. At the defaults, 39.99 minus 27.40 is 12.59, and 12.59 ÷ 39.99 × 100 gives 31.48%.
What is the difference between margin and markup? Margin divides dollars by price; markup divides the same dollars by cost. A 31.48% margin is a 45.95% markup, so a supplier asking for cost plus 30% is not asking for a 30% margin.
How do I price to hit a target margin? Divide delivered cost by one minus the target margin as a fraction. For a 30% target and 27.40 delivered cost, divide 27.40 by 0.7 to get 39.14, then round to a retail friendly price.
Why is the cost ceiling not the same as delivered cost? The ceiling is the highest cost the current price can carry at the target margin. Delivered cost above it produces a negative gap, which tells you to raise price, cut cost, or lower the target.

Last reviewed 2026-10-01.