Trade Discount vs Markup: The Confusion That Costs Designers Money
Two numbers run interior design product pricing, and mixing them up is one of the most common ways designers leave money on the table or quote themselves into a loss. The first is your trade discount: the percentage off retail a vendor gives you because you're a verified professional. That sets your cost, often called your designer net price. The second is your markup: the percentage you add on top of that cost to reach the client's price. They sound interchangeable. They aren't, and they aren't symmetric.
Here's the trap. A sofa retails at 5,000. Your trade discount is 40 percent, so you pay 3,000. Now you mark it up 40 percent. Many designers assume that cancels out to retail. It doesn't: 3,000 plus 40 percent is 4,200, which is below the 5,000 retail. A 40 percent discount and a 40 percent markup are different operations on different base numbers, and that gap is exactly where profit quietly disappears.
The three models, same sofa
Cost-plus charges your net cost plus a markup. On our sofa at a 35 percent markup, that's 3,000 plus 35 percent, a client price of 4,050 and 1,050 of profit, while the client still pays under retail. Keystone (or retail) pricing sells the item at full retail and you keep the spread between your cost and retail, here 5,000 minus 3,000, a 2,000 profit, the simplest and often most profitable approach. Split-the-discount shares the savings: you give the client part of your discount and keep the rest as commission, landing somewhere in between. Same product, three very different profits, which is why choosing a model deliberately matters as much as the markup number.
Why separating product profit from your fee matters
The cleanest businesses split two things clients often conflate: the trade markup, which compensates you for access to pricing they can't get, and your design or procurement fee, which compensates you for the hours of sourcing, specifying, ordering, and coordinating. Keeping them separate gives clients a clearer sense of value and sidesteps the resentment that "interior design tax" framing can create around product markups.
Frequently Asked Questions
Is a 40% discount the same as a 40% markup?
No. They're calculated on different base numbers. A 40 percent discount on a 5,000 retail item gives you a 3,000 cost; a 40 percent markup on that 3,000 cost gives a 4,200 client price, still below retail. Confusing the two is the single most common interior design pricing error.
Should I charge retail or cost-plus?
Keystone (selling at retail and keeping the spread) is usually the most profitable and is simple for clients to understand. Cost-plus feels more transparent and can build trust, but may land below retail depending on your discount and markup. Many designers pick based on their client relationship and how they position their fees.
What markup should interior designers use?
Commonly 25 to 50 percent over net cost, though it varies by category and business model. The more useful question is which pricing model you use and whether you separate product profit from your design and procurement fee, since that decides your real margin more than the markup percentage alone.