Markup is the difference between the cost of an item and the price at which it is offered for sale, expressed either as an absolute amount, a percentage of cost, or a multiplier of cost. The term is often used interchangeably with mark-up factor, but the two are not strictly identical: the factor is the multiplier (cost times factor equals retail price) while markup, in its narrow sense, is the dollar amount or percentage added.

Conventions in the trade

In the North American jewellery trade, markup is most often expressed as a multiplier on landed cost. Keystone, the historical baseline, refers to a multiplier of two, equivalent to a markup of 100 percent of cost or a gross margin of 50 percent of retail. Markups in independent fine-jewellery stores commonly run from a multiplier of 2.0 to 3.5, with the higher end reserved for slow-turning fashion goods or coloured stones, and the lower end typical of higher-ticket items such as bridal centre stones, where price competition is more intense.

Confusion between markup percentage and gross-margin percentage is widespread and can cause meaningful errors in financial planning. A 50 percent markup on cost yields a 33 percent gross margin on retail. A 100 percent markup yields 50 percent margin. A 200 percent markup yields 67 percent margin. The relationship is not symmetrical, and a buyer or retailer who confuses the two understates either profitability or pricing.

What gets marked up

The base on which markup is calculated matters as much as the rate. A landed-cost base, including the loose stones, mounting cost, freight, duty and quality-control allowances, gives a stable platform. A loose-stone-only base, ignoring mounting and labour, produces apparently high margins that disappear once labour is paid. Custom and bespoke work usually applies separate markups to materials and labour, with labour priced at a hourly rate that already incorporates the bench's overhead.

Negotiation and disclosure

For the consumer, markup is the structural reason that listed prices on stock pieces in independent shops are negotiable. A piece carried at a 3.0 factor can be discounted significantly without becoming unprofitable. Bespoke work, by contrast, is much harder to discount because the cost base is itself a one-off calculation. The Federal Trade Commission's Jewelry Guides require accurate disclosure of treatments, materials and origin, but they do not regulate markup; pricing is left to the market.