Gross margin formula
(Retail Price - Wholesale Cost) ÷ Retail Price × 100
If a necklace costs $40 wholesale and sells for $100 retail, gross margin is 60% before shipping, payment fees, rent, labour, marketing, and markdowns.
| Product role | Wholesale cost | Suggested retail | Estimated margin |
|---|---|---|---|
| Entry gift earrings | $24 | $59 | 59% |
| Everyday pendant necklace | $45 | $109 | 59% |
| Gemstone bracelet | $38 | $89 | 57% |
| Gift set | $72 | $169 | 57% |
Part 01
Margin is not the same as markup
Markup compares profit to the wholesale cost. Margin compares profit to the retail price. Retailers often talk about margin because it shows how much of the selling price remains before operating costs.
A product bought for $40 and sold for $100 has a $60 gross profit. The markup is 150%, but the gross margin is 60%. Mixing these terms can lead to weak pricing decisions, especially when discounts and shipping costs enter the picture.
- Gross profit = retail price minus wholesale cost.
- Gross margin = gross profit divided by retail price.
- Markup = gross profit divided by wholesale cost.
Part 02
Set retail prices around product role
Not every product needs the same margin. Entry gifts may need sharp pricing to attract buyers. Premium solid-gold items may carry lower percentage margin but higher cash profit. Gift sets may justify stronger perceived value through packaging and presentation.
Build a price ladder so customers can move naturally from small gifts to premium pieces. A balanced range often includes accessible impulse gifts, core everyday jewellery, and statement or milestone products.
- Use entry products to bring customers into the category.
- Use core products for repeatable margin and reorder stability.
- Use premium products to raise average order value and brand perception.
Part 03
Account for hidden costs before discounting
A retail margin that looks healthy on paper can shrink quickly after payment fees, packaging, free shipping, returns, staff time, marketplace fees, and markdowns. Before running a sale, calculate the margin after the discount rather than assuming the original margin survives.
This is especially important for jewellery because presentation is part of the product. Gift boxes, cards, pouches, and protective packing can increase perceived value, but they should be priced into the model.
- Include packaging and fulfilment cost in pricing decisions.
- Know your minimum profitable sale price before promotion.
- Bundle slow sellers with strong sellers only when the combined margin still works.
Key takeaways
- • Use gross margin for retail planning and keep markup terminology separate.
- • Price by product role, not by one blanket multiplier.
- • Discount only after calculating post-discount margin.
Common questions
FAQ
It depends on material, channel, packaging, and customer segment. Many retailers target strong gross margins on fashion and giftable jewellery, while fine jewellery may have lower percentage margin but higher cash value.
Use suggested retail price as a planning anchor, then adjust for your market, positioning, shipping model, taxes, and brand perception.
Set a minimum profitable sale price first. Promotions should move inventory or create a gift bundle without training customers to wait for discounts.