What Is Keystone Pricing?
Keystone pricing is a retail pricing method that sets the selling price at exactly twice the product cost. A product that costs $32 to source gets a keystone price of $64. The formula:
Keystone Price = Cost × 2
This produces a 100% markup on cost and a 50% gross margin on the selling price — before shipping, payment fees, marketing, or other expenses. Keystone pricing is popular because it's simple to apply across an entire catalog, but it doesn't guarantee profitability on every product once order-level costs are deducted.
The term comes from traditional retail, where doubling the wholesale cost was the standard starting point for setting a retail price. Many retailers still use it as a baseline, then adjust up or down depending on the product category, competition, and operating costs.
What Is Keystone Markup?
Keystone markup is the 100% markup that defines keystone pricing. "Markup" means the percentage added on top of cost, while "margin" is the percentage of the selling price that is profit.
| Term | Formula | Result at $32 cost |
|---|---|---|
| Keystone markup | Cost × 2 | $64 selling price |
| Markup percentage | ($64 − $32) ÷ $32 × 100 | 100% |
| Gross margin | ($64 − $32) ÷ $64 × 100 | 50% |
A 100% markup always equals a 50% margin. This is the key relationship behind keystone pricing — doubling the cost means exactly half the selling price is gross profit.
Markup vs. Margin — Why It Matters
Confusing markup and margin changes your price. If you target a "100% margin" instead of a "100% markup," you'd need an infinitely high price (since margin can never reach 100%). In practice:
| Markup | Selling price (on $32 cost) | Gross margin |
|---|---|---|
| 50% | $48 | 33.3% |
| 100% (keystone) | $64 | 50.0% |
| 150% | $80 | 60.0% |
| 200% | $96 | 66.7% |
Use the Markup Calculator to convert between markup and margin for any percentage, or the MSRP Calculator to set a price from a target margin instead.
Keystone Pricing Formulas
Keystone price = Cost × 2
Custom selling price = Cost × (1 + Custom markup ÷ 100)
Markup % = ((Selling price − Cost) ÷ Cost) × 100
Gross margin = ((Selling price − Cost) ÷ Selling price) × 100
Net profit = Selling price − Cost − Shipping − Transaction fee − Additional costs
Net margin = (Net profit ÷ Selling price) × 100
Monthly profit = Net profit × Monthly units
The calculator applies the transaction fee as a percentage of the selling price. Fixed per-transaction charges (e.g., $0.30 from Stripe) are not included — subtract those separately if they apply.
How to Use This Calculator
- Cost price — Per-unit cost to source or manufacture the product (COGS).
- Custom markup — A markup percentage to compare against keystone. The calculator shows both prices side by side.
- Shipping cost — The per-order shipping you absorb, not the amount charged to the customer.
- Transaction fee — Your payment processor's percentage rate (e.g., 2.9% for Shopify Payments).
- Additional costs — Per-unit expenses like packaging, inserts, or a share of monthly app costs divided by expected units.
- Monthly units — Estimated sales volume to project monthly profit.
Step-by-Step Example
A Shopify merchant sells a ceramic planter at $32 cost. They compare keystone pricing with a 125% custom markup, absorbing $6 shipping, $3 in other costs, and paying a 2.9% transaction fee.
| Calculation | Keystone (100%) | Custom (125%) |
|---|---|---|
| Selling price | $32 × 2 = $64.00 | $32 × 2.25 = $72.00 |
| Gross profit | $32.00 | $40.00 |
| Gross margin | 50.0% | 55.6% |
| Transaction fee | $1.86 | $2.09 |
| Net profit per order | $21.14 | $28.91 |
| Net margin | 33.0% | 40.2% |
| Monthly profit (80 units) | $1,691 | $2,313 |
The 125% markup adds $7.77 in profit per order. Whether that holds depends on whether the higher price reduces conversion — compare total monthly profit at realistic volume estimates, not just per-unit margin.
When Keystone Pricing Works (and When It Doesn't)
Keystone works best when:
- Operating costs are low — minimal shipping, cheap packaging, low return rate
- The product category expects 2× pricing — many fashion, accessories, and home goods products follow keystone norms
- You need a fast pricing rule for a large catalog and plan to optimize individual products later
Keystone falls short when:
- Shipping is expensive — bulky or heavy items eat into the 50% margin quickly
- Fixed payment fees are high relative to the price — a $10 product with $0.30 + 2.9% processing loses a bigger share than a $64 product
- Marketing costs are substantial — if customer acquisition costs $15 per order, a $32 gross profit on a $64 sale becomes $17 before other costs
- Competitors price aggressively — if the market price is $45, a $64 keystone price won't sell regardless of your margin target
How to Choose Between Keystone and a Custom Markup
| Markup on cost | Selling price multiple | Gross margin |
|---|---|---|
| 100% (keystone) | 2× | 50.0% |
| 150% | 2.5× | 60.0% |
| 200% | 3× | 66.7% |
| 250% | 3.5× | 71.4% |
Test both in the calculator with your actual costs. The right markup is the one that covers all expenses, matches customer expectations, and leaves enough margin after the costs you entered.
The U.S. Small Business Administration recommends considering costs, customers, and competitors when setting prices (SBA pricing guidance). If you advertise a former price or a discount, make sure the comparison is truthful under FTC advertising guidance.
6 Pricing Experiments to Try
- Raise your custom markup from 120% to 140% and compare the net profit increase against a realistic conversion drop.
- Reduce absorbed shipping from $8 to $5 by testing a smaller package or carrier rate — check if the savings improve net margin meaningfully.
- Add $1.50 per order for packaging to see if premium unboxing still leaves enough net profit.
- Change the transaction fee to your actual rate and compare providers on the same order values.
- Test a bundle price by estimating the combined cost and shipping for two products. Bundling spreads shipping across items but may need a discount.
- Allocate a $240 monthly app expense across 120 orders — enter $2 per unit under additional costs to make the projection realistic.
Frequently Asked Questions
What is keystone pricing?
Keystone pricing is a retail strategy that sets the selling price at exactly twice the product cost, creating a 100% markup and a 50% gross margin. It's widely used as a starting point because it's simple, but net profit depends on shipping, payment fees, and other costs.
What is keystone markup?
Keystone markup is the 100% markup that defines keystone pricing. It means adding the full cost on top of itself: a $20 product becomes $40. The resulting gross margin is always 50% of the selling price.
Is keystone pricing good for Shopify stores?
It works when operating costs are low and the price fits customer expectations. It may leave too little profit when shipping, advertising, or payment costs are high. Compare net margin at both keystone and custom markups before applying one rule across your catalog.
What is the difference between keystone pricing and markup?
Markup is the general concept of adding a percentage to cost. Keystone pricing is the specific case where that markup is 100% (2× cost). You can use any markup percentage — keystone just refers to the 2× version.
What margin does keystone pricing give you?
Keystone pricing produces a 50% gross margin before expenses. Net margin after shipping, payment fees, and other costs will be lower — often 25–35% depending on the product. Use the calculator to see your actual net margin.
When should I use more than keystone pricing?
Use a higher markup when variable costs are substantial, your product is differentiated, or the keystone price leaves net margin below your target. The tradeoff is that a higher price may reduce conversion rate.
What is the keystone pricing formula?
Keystone Price = Cost × 2. For a product that costs $25, the keystone price is $50. This gives a 100% markup and 50% gross margin.
Is keystone pricing the same as 50% margin?
Yes — a 100% markup on cost equals a 50% gross margin on the selling price. They describe the same price from different perspectives: markup measures profit against cost, margin measures profit against revenue.
About This Calculator
The Keystone Pricing Calculator was built by Luis Dev Studio for Shopify merchants comparing 2× pricing with custom markups. For help with your store's pricing strategy, contact us or explore our Shopify services.
Updated by Luis Gonzalez · Oct 11, 2026