Which cost do I enter — FOB or landed?

Landed cost: the unit cost with inbound freight, duty, and handling in. A quoted FOB price understates what the unit actually cost, so an IMU calculated on it overstates the markup you have. Take the $68 linen shirt in the worked example on this page: on the $15 FOB quote it reads (68 − 15) ÷ 68 = 77.9%, and on the $18 landed cost it really carries, (68 − 18) ÷ 68 = 73.5% — 4.4 points of markup that does not exist once freight, duty and handling are in.

How do you calculate IMU?

IMU % on retail = (Retail − Cost) ÷ Retail × 100. For example, a unit that costs $18 and retails at $68 has an IMU of (68 − 18) ÷ 68 = 73.5%. To price to a target IMU instead, retail = Cost ÷ (1 − IMU%): to hit a 70% IMU on an $18 cost, retail = 18 ÷ 0.30 = $60.

What is the difference between IMU and gross margin?

IMU is the markup on the first-ticket price. Gross margin (or maintained markup) is what you actually realize after markdowns, shrink, and discounts pull the average selling price below the ticket. IMU is always higher than maintained margin — the gap between them is everything that erodes price after the first ticket.

Why does IMU need to be higher than your target margin?

Because every reduction taken after the first ticket comes out of the IMU and nothing puts it back. Whatever a range gives up to markdowns, shrink and discounts — say 20% of retail — lands the realized margin that far below the IMU. Setting IMU above the target maintained margin is how the plan leaves room for the reductions it expects and still hits the margin it needs; an IMU set at the target itself has no room in it, and the first markdown puts the season under plan.

Is IMU calculated on cost or on retail?

Both are used, so be explicit. IMU on retail = (Retail − Cost) ÷ Retail; markup on cost = (Retail − Cost) ÷ Cost. Retail-method planning uses markup on retail (it ties directly to margin), while markup on cost is common in quick pricing. This calculator shows both so there is no ambiguity.

// Tools

Initial markup (IMU) calculator

Initial markup (IMU) is the first markup on a style, taken before any reductions — (Retail − Cost) ÷ Retail. Enter a cost and a retail price (or a target IMU %) to see IMU on retail, markup on cost, gross margin, and the margin that survives your expected markdowns.

Looking for what IMU means and how planners set it — the retail-dollar weighting that makes a class IMU differ from its styles, and why an IMU on a quoted FOB overstates the markup you have?

Read the Definition →

Unit cost ($)

Initial retail price ($)

…or target IMU % (on retail)

Expected reductions % (markdowns + shrink + discounts, optional)

Enter a cost, then either an initial retail price or a target IMU % — the calculator derives the other. Retail takes priority if both are filled.

Enter a unit cost and either a retail price or a target IMU % to see the results.

// How it works

01
Enter unit cost
The landed cost of one unit.
02
Enter initial retail (or a target IMU %)
Give the first-ticket retail price, or a target IMU % and the calculator derives the retail as Cost ÷ (1 − IMU%).
03
Read IMU %
IMU % = (Retail − Cost) ÷ Retail. This is the first markup, before any reductions.
04
Add expected reductions (optional)
Enter markdowns + shrink + discounts as a % of retail to see the maintained (realized) margin after those reductions.

// Formula & example

Formula & a worked example

IMU % (on retail) = (Retail − Cost) ÷ Retail. Take a linen shirt costing $18 with a first-ticket retail of $68: IMU = (68 − 18) ÷ 68 = 73.5%, and markup on cost = 50 ÷ 18 = 278%.

Now assume 22% of retail is given up to markdowns, shrink, and discounts. Average selling price = 68 × (1 − 0.22) = $53. Maintained margin = (53 − 18) ÷ 53 = 66%. The 7.5-point gap between the 73.5% IMU and the 66% realized margin is exactly what the reductions cost you — which is why IMU is set above the margin the plan actually needs.

// Reading the result · where spreadsheets break

Read IMU against your target maintained margin, not on its own — the useful number is the gap you are leaving for reductions. Too little gap and a normal markdown cadence pushes you under plan; too much and you may be pricing above the market. IMU is a planning assumption, not just a pricing output.

In a spreadsheet, IMU lives per style in one file while the markdowns that erode it land in another, and the two are reconciled after the season. By then the realized margin is whatever it is. The value is in seeing IMU, planned reductions, and maintained margin together while you are still setting the price.

RetailNorthstar connects pricing and markdown assumptions to the plan, so initial markup and maintained margin stay linked from line plan to season close — see more retail tools.

Start Free Trial →See RetailNorthstar →

// FAQ

Frequently asked questions

Which cost do I enter — FOB or landed?: Landed cost: the unit cost with inbound freight, duty, and handling in. A quoted FOB price understates what the unit actually cost, so an IMU calculated on it overstates the markup you have. Take the $68 linen shirt in the worked example on this page: on the $15 FOB quote it reads (68 − 15) ÷ 68 = 77.9%, and on the $18 landed cost it really carries, (68 − 18) ÷ 68 = 73.5% — 4.4 points of markup that does not exist once freight, duty and handling are in.
How do you calculate IMU?: IMU % on retail = (Retail − Cost) ÷ Retail × 100. For example, a unit that costs $18 and retails at $68 has an IMU of (68 − 18) ÷ 68 = 73.5%. To price to a target IMU instead, retail = Cost ÷ (1 − IMU%): to hit a 70% IMU on an $18 cost, retail = 18 ÷ 0.30 = $60.
What is the difference between IMU and gross margin?: IMU is the markup on the first-ticket price. Gross margin (or maintained markup) is what you actually realize after markdowns, shrink, and discounts pull the average selling price below the ticket. IMU is always higher than maintained margin — the gap between them is everything that erodes price after the first ticket.
Why does IMU need to be higher than your target margin?: Because every reduction taken after the first ticket comes out of the IMU and nothing puts it back. Whatever a range gives up to markdowns, shrink and discounts — say 20% of retail — lands the realized margin that far below the IMU. Setting IMU above the target maintained margin is how the plan leaves room for the reductions it expects and still hits the margin it needs; an IMU set at the target itself has no room in it, and the first markdown puts the season under plan.
Is IMU calculated on cost or on retail?: Both are used, so be explicit. IMU on retail = (Retail − Cost) ÷ Retail; markup on cost = (Retail − Cost) ÷ Cost. Retail-method planning uses markup on retail (it ties directly to margin), while markup on cost is common in quick pricing. This calculator shows both so there is no ambiguity.

// Related resources

See the connected workflow in RetailNorthstar →