Wholesale Margin Calculator
Wholesale margin is the wholesale price minus the distributor's purchase cost, divided by the wholesale price. Enter the purchase cost, the wholesale price and the retail price to get the profit, margin and markup of the distributor and of the retailer, plus the overall margin from purchase cost to retail price.
What you pay the manufacturer or importer per unit, before tax, freight and duties included
What the retailer pays you per unit, before tax and after discounts
What the end customer pays, before VAT or sales tax
Profit = Selling price − Cost
Margin = Profit ÷ Selling price
Markup = Profit ÷ Cost
Wholesale price = Retail price × (1 − retailer margin)
Example:
- • Cost 60, wholesale price 75, retail price 100
- • Distributor: profit 15, margin 20%, markup 25%
- • Retailer: profit 25, margin 25%, markup 33.33%
- • Whole chain: profit 40, margin 40%
Margin is measured on the selling price, markup on the cost. A 25% markup is a 20% margin, so a percentage quoted without its base can mean two different prices. For a single buy-and-sell price, use the profit margin calculator.
How do you calculate wholesale margin?
Wholesale margin is the wholesale price minus the distributor's purchase cost, expressed as a percentage of the wholesale price. The same profit can also be expressed as a percentage of the cost, which is the markup. Both figures describe one profit, and they are never equal unless the profit is zero. Use prices before VAT or sales tax throughout.
| Measure | Formula | Example (cost 60, wholesale price 75) |
|---|---|---|
| Profit per unit | selling price − cost | 75 − 60 = 15 |
| Margin | profit ÷ selling price × 100 | 15 ÷ 75 = 20% |
| Markup | profit ÷ cost × 100 | 15 ÷ 60 = 25% |
| Price multiplier | selling price ÷ cost | 75 ÷ 60 = 1.25 |
What are the steps?
Five steps, always on prices before tax:
- Note your purchase cost per unit before tax, including freight and import duties.
- Note the price you charge the retailer, before tax and after discounts.
- Subtract the cost from the selling price: that is your profit per unit.
- Divide the profit by the selling price to get the margin, and by the cost to get the markup.
- Repeat the calculation for the retailer, between your wholesale price and its retail price before tax, to see what the product earns the retailer.
Worked example: what are the margins on a product bought at 60 and retailed at 100?
If the distributor buys at 60 and sells to the retailer at 75, and the retailer sells at 100 before tax, the distributor earns a 20% margin, the retailer 25% and the whole chain 40%.
| Level | Buys at | Sells at | Profit | Margin | Markup |
|---|---|---|---|---|---|
| Distributor | 60 | 75 | 15 | 20% | 25% |
| Retailer | 75 | 100 | 25 | 25% | 33.33% |
| Whole chain | 60 | 100 | 40 | 40% | 66.67% |
Profits add up: 15 + 25 = 40. The percentages do not: 20% + 25% is not 40%.
Why don't the margins at each level add up?
Because each margin is a share of a different selling price: the distributor's 20% is taken on 75, the retailer's 25% on 100. Margins compound instead of adding up: overall margin = 1 − (1 − 0.20) × (1 − 0.25) = 1 − 0.80 × 0.75 = 40%. Every intermediary added between the manufacturer and the end customer takes its share on a price that already includes the previous one's margin.
Margin or markup: which one are you being quoted?
Always state the base with the percentage, because the same product shows a 20% margin and a 25% markup. A buyer who asks for “25%” may mean either one: ask which, or talk in prices rather than percentages. To convert, margin = markup ÷ (1 + markup), so 0.25 ÷ 1.25 = 20%. The profit margin calculator covers the case of a single cost and a single selling price.
How do you set a wholesale price from the retail price?
Start from the retail price before tax and take out the retailer's margin: wholesale price = retail price × (1 − retailer margin). For a product that retails at 100 where the retailer expects a 25% margin, the highest wholesale price is 100 × (1 − 0.25) = 75. If you want a 20% margin yourself, your purchase cost must not exceed 75 × (1 − 0.20) = 60.
This backward calculation, available in the “Start from retail price” tab, is the one to use when the market sets the shelf price: it shows at once whether a product leaves enough margin for everyone. If the shelf price includes VAT or sales tax, remove the tax first.
What is a good wholesale margin?
There is no reference figure that fits every business: it depends on the sector, the volumes, how fast the product sells and the services you provide. A fast-moving product can live on a thin unit margin, while a slow one that sits in the warehouse has to earn more on each sale. The inventory turnover calculator measures that speed, and the reorder point calculator helps keep fast sellers in stock. The useful comparisons are your own history and your direct competitors' prices. Above all, check that the margin covers what this calculation does not see: delivery, year-end rebates, payment terms, returns and unsold goods.
What mistakes distort a margin calculation?
Six mistakes come up again and again:
- Confusing margin and markup: adding 25% to a cost gives a 20% margin, not 25%.
- Mixing prices with and without tax: tax collected from the customer is not margin.
- Calculating on list price: discounts, rebates and free goods given to the retailer lower the price you actually collect.
- Leaving out landed costs: freight and import duties are part of the purchase cost.
- Adding up the percentages of each level: only profits in currency add up.
- Treating gross margin as net profit: it still has to pay for wages, rent, vehicles and bad debts.
Frequently asked questions
What is the difference between wholesale margin and retail margin?
Wholesale margin is measured between the distributor's purchase cost and the wholesale price charged to the retailer. Retail margin is measured between that wholesale price and the price the end customer pays, before tax. The wholesale price is the selling price of one and the cost of the other.
How do I convert markup to margin?
Margin = markup ÷ (1 + markup). A 25% markup is 0.25 ÷ 1.25 = a 20% margin. The other way round, markup = margin ÷ (1 − margin).
Should margins be calculated before or after tax?
Before tax. VAT or sales tax collected from the customer is passed on to the tax authority, and recoverable VAT paid on purchases is not a cost, so neither belongs in the calculation. Mixing prices with and without tax distorts the margin.
What multiplier gives a target margin?
Multiplier = 1 ÷ (1 − margin). For a 20% margin the multiplier is 1 ÷ 0.80 = 1.25: a product bought at 60 sells at 60 × 1.25 = 75 before tax.
Does gross margin tell me whether a product is profitable?
No. Gross margin only accounts for the purchase cost. Freight, storage, sales staff, bad debts and overheads still have to be covered. A high-margin product that sits in stock for a long time can earn less than a low-margin product that sells quickly.
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How many times your stock turns over, and in how many days.
Reorder point calculator
The stock level that should trigger your next order.
Stock value calculator
The total value of the inventory you hold.
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Updated on 9 October 2026