Ecommerce · 28 Oct 2026
Margin vs markup: the difference, with examples
Margin is profit as a share of the price; markup is profit as a share of cost. See the formulas, two-way conversion tables and how to price on landed cost.
Key takeaways
- Discount % = (original price − sale price) ÷ original price × 100. A $80 item reduced to $60 is 25% off.
- Sale price = original price × (1 − discount). 30% off $45 is $45 × 0.70 = $31.50.
- Discounts eat margin fast. With a 40% margin, a 20% discount means you must sell twice as many units to make the same profit.
To calculate a discount percentage, subtract the sale price from the original price, divide by the original price and multiply by 100. That is all a shopper needs. Store owners need one more step: checking how much margin the discount gives away and how many extra sales it takes to earn the same profit.
The discount percentage formula
Discount % = (original price − sale price) ÷ original price × 100
Example: a jacket drops from $80 to $60. ($80 − $60) ÷ $80 = 0.25, so the discount is 25%.
How to calculate the sale price
Sale price = original price × (1 − discount as a decimal)
| Original price | Discount | Math | Sale price | You save |
|---|---|---|---|---|
| $45 | 30% | $45 × 0.70 | $31.50 | $13.50 |
| $120 | 15% | $120 × 0.85 | $102.00 | $18.00 |
| $65 | 20% | $65 × 0.80 | $52.00 | $13.00 |
| $249 | 40% | $249 × 0.60 | $149.40 | $99.60 |
To reverse it and find the original price, divide the sale price by (1 − discount). $42 after 30% off was originally $42 ÷ 0.70 = $60.
Stacked discounts are not added together
"20% off, plus an extra 10% at checkout" sounds like 30%. It is not. The second discount applies to the already reduced price:
$100 × 0.80 = $80, then $80 × 0.90 = $72. Total discount: 28%.
The shortcut: multiply the remaining fractions. 0.80 × 0.90 = 0.72, so you pay 72% and save 28%. Two 10% discounts equal 19% off, and two 50% discounts equal 75% off, not "free".
What a discount does to your profit margin
The discount comes straight out of your profit, not your revenue alone. Say a product sells for $100 and costs you $60. Your margin is 40% ($40 profit). At 20% off you sell for $80, profit drops to $20 and margin falls to 25%. You now need two sales to make the $40 you made with one.
Extra sales needed = discount ÷ (margin − discount)
| Gross margin | Discount | Extra unit sales needed |
|---|---|---|
| 30% | 10% | +50% |
| 40% | 10% | +33% |
| 40% | 20% | +100% |
| 50% | 20% | +67% |
| 60% | 25% | +71% |
If you are unsure of your margin, work it out first with the profit margin calculator, and do not confuse it with markup; our margin vs markup guide explains why a 50% markup is only a 33% margin.
Smarter ways to discount
- Set a minimum order value ("15% off orders over $75") so the discount lifts basket size.
- Offer a fixed amount instead of a percentage on high-ticket items; "$20 off" can cost less than 10% off a $250 product.
- Bundle slow sellers with best sellers rather than discounting the best sellers.
- Reward loyalty, not everyone. Targeted codes protect margin on customers who would buy anyway.
- Price for promotions from the start. Build discount room into your list price; see how to price a product for profit.
If you sell with paid ads, a discount also lowers the revenue per order, which raises the return on ad spend you need. Re-check your number with the break-even ROAS calculator.
Keep your "was" prices honest
In the US, the FTC’s Guides Against Deceptive Pricing say a former price should be one the item was actually offered at, in good faith, for a reasonable period. UK and EU rules are similar. Inflating a "was" price to make a discount look bigger can break consumer law and damages trust.
FAQ
How do I calculate 20% off a price?
Multiply the price by 0.80. 20% off $65 is $65 × 0.80 = $52, a saving of $13.
How do I find the original price from a sale price?
Divide the sale price by (1 − discount). If an item is $42 after 30% off, the original was $42 ÷ 0.70 = $60.
Are two 10% discounts the same as 20% off?
No. Two 10% discounts applied one after the other equal 19% off, because the second 10% is taken from an already reduced price.
How big a discount can I afford?
Your discount must stay well below your gross margin percentage. Use: extra sales needed = discount ÷ (margin − discount). If discount equals margin, you make zero profit on every sale.