Profit margin for marketplace sellers

Margin versus markup and ROI

Margin measures profit as a share of selling revenue. Markup compares profit with cost, while ROI compares profit with invested cash. The terms are related but not interchangeable.

For product sourcing, calculate margin after relevant marketplace, fulfillment, inbound, advertising, discount, and return-related costs. Keep the assumptions visible so comparisons remain useful.

Margin vs markup

Markup compares profit with cost, while margin compares profit with price. The same deal shows a larger markup than margin.

Be consistent about whether you use margin or markup when you compare deals, so the numbers stay comparable.

Margin is a share of revenue, not a markup on cost

Illustrative example only: if the modeled selling revenue is $25 and estimated profit after the costs you included is $5, margin is $5 ÷ $25 = 20%. If a discount changes the revenue used by the model, the margin changes even if supplier cost stays the same.

Markup uses cost as its denominator; ROI uses invested cash. Those percentages can differ from margin for the same product. State whether your revenue input reflects a promotion or other adjustment before comparing products.

• Profit margin = estimated profit ÷ modeled selling revenue × 100.
• Markup = profit compared with cost; ROI = profit compared with invested cash.
• Include the same applicable fees and operating costs in each comparison.