Intake marginIntake margin (initial markup)

Intake margin is the gross margin built into a product the moment you buy it — the gap between the planned selling price and the landed cost, expressed as a percentage of the selling price. It's sometimes called initial markup (IMU). It's the margin you start with, before the season does anything to it.

It matters because it's the ceiling. Every other margin event in a season — markdown, promotion, shrinkage, returns — can only take margin away. Nothing adds it back. So the intake margin you buy at sets the maximum the season can deliver. Buy thin, and no amount of clever trading recovers it.

The formula

Intake margin % = (Selling price − Landed cost) / Selling price × 100

Worked example. A line is bought at a landed cost of £18 and planned to retail at £60.

Intake margin = (£60 − £18) / £60 = £42 / £60 = 70%

That 70% is the margin you've bought. It is not the margin you'll realise — markdowns and promotions will pull the achieved margin below it across the season. But it's the number every downstream calculation starts from.

Landed cost, not invoice cost

The single most important word in the formula is landed. Intake margin is only honest if the cost side includes everything it took to get the unit onto your shelf, not just the supplier's invoice.

Landed cost rolls in freight, duties and tariffs, insurance, and handling on top of the unit price. A £15 invoice cost can easily be a £18 landed cost once a container of freight and a tariff line are spread across the units.

Calculate intake margin off the invoice cost and you'll overstate it by exactly the costs you ignored — and you'll discover the real number only when the season's margin comes in light and you can't explain why. The cost sheet shows a margin you never actually bought.

Why it caps the season

Think of intake margin as the budget the rest of the season spends down:

• Markdown spends it directly — every point of price cut comes off the intake margin.
• Promotion spends it temporarily, but the units sold on promotion realise less than the intake.
• Returns and shrinkage spend it through units that cost you but never sell at full price.

The achieved margin — what actually lands in the P&L — is intake margin minus all of that. A range bought at 70% intake margin that runs 25% of sales through markdown might realise 55%. A range bought at 55% intake margin in the same conditions might realise 40% and be borderline unviable.

This is why the buy is the most consequential margin decision a brand makes. You can trade well or badly within the intake margin, but you can't trade your way above it.

Intake margin across the buy

Intake margin isn't one number; it's a distribution across the range, and the mix matters:

• By option. Hero lines often carry lower intake margin to hit a sharp opening price; the range needs higher-margin lines to balance the blended number.
• By category. Accessories and add-ons typically carry higher intake margin than headline pieces, and prop up the overall figure.
• By supplier. Two suppliers quoting similar unit prices can land at very different intake margins once freight, MOQ, and duties are loaded in — the cheaper invoice isn't always the better buy.

Planning the blended intake margin across the range — not just line by line — is what keeps a season's margin target achievable.

Common pitfalls

• Using invoice cost instead of landed cost. Freight and duties are real; leaving them out overstates intake margin by exactly what you ignored.
• Confusing intake margin with achieved margin. Intake is the starting margin; achieved is what's left after markdown, promotion, and returns. Intake is always the higher number.
• Planning intake margin line by line only. The blended figure across the range is what hits the P&L; a few low-margin hero lines need higher-margin lines to balance.
• Treating the cost sheet figure as final. Landed costs move with freight rates and exchange; the intake margin you bought can differ from the one you planned.