Retail markup refers to the difference between the cost of a product and its selling price. Retailers purchase items from manufacturers or wholesalers at a certain price and then add a percentage to that cost to determine the final price for consumers. This added amount helps cover operating expenses and generates profit. For example, if a retailer buys a shirt for $20 and sells it for $30, the retail markup is $10. This markup is often expressed as a percentage of the cost, which in this case would be 50%. Understanding retail markup is essential for both retailers and consumers in evaluating pricing strategies.