A picture is worth a thousand words. With thousands of varying explanations for different retail terminologies online, it is very easy to get tripped up on the differences between initial markup, maintained markup, markdowns, etc. Most retail terminologies are fairly simple and very logical, though when used inconsistently, it is easy to get confused.
Our goal at Toolio is to make sure that we clearly define and explain all the important retail terminologies. In this post, we cover how Initial Markup (IMU), and Maintained Markup (MMU) are calculated, along with an image that illustrates it. Let's dive straight into it:
Let's say that we are selling a product that was:
- Produced / procured at $20.00, which is the Cost of Goods Sold, i.e. COGS
- Initially priced at $100.00, which is the Ticket Price
- Finally sold at $65.00, which is the Sale (Retail) Price (after applying Markdowns of $10.00 and Discount of $25.00)
Given this information, let's see how we calculate IMU and MMU
IMU = Ticket Price - COGS = $100.00 - $20.00 = $80.00
As the name implies, IMU gives what the initial markup, i.e. profit target, was for the product. At the ticket price, the markup for this product was going to be $80.00
MMU = Sale (Retail) Price - COGS = $65.00 - $20.00 = $45.00
Maintained markup gives the ultimate profit that was achieved, AKA gross margin, for that product. At the sale (retail) price, the maintained (i.e. ultimately achieved) markup was $45.00.
That covers the difference between IMU and MMU. If you want to see details on other retail math formulas, check out our Toolio's retail math formulas post.