Average retail markup is an accounting term used to describe the difference between a product’s cost and its selling price. It is calculated by taking the sales revenue generated from products, minus the cost of producing them, and then dividing that amount by the total cost of the products. Put simply, average retail markup measures how much profit a business makes on its products compared to their cost.
It’s an essential metric for businesses to understand, as it helps calculate their net profits and ensure they are pricing their products correctly. Average retail markup provides crucial insight into a company’s financial performance and profitability, allowing businesses to make better informed decisions about their pricing strategies.