Gross profit margin calculator
Calculate your profit margin to understand how much money you actually keep. Keep in mind that you should aim for a gross profit margin of 60–80%.
Quick intro to gross profit margin
Gross profit margin in e-commerce is a key financial metric that represents the percentage of revenue left over after deducting the cost of goods sold (COGS)—which typically includes product costs, shipping to your warehouse, packaging, and manufacturing expenses.
For store owners, understanding your gross profit margin helps you assess how profitably you're sourcing, pricing, and selling your products.
Ideal profit margin
Keep in mind that your target gross profit margin shuold be between 60 to 80%. Set your pricing strategy accordingly.
Best way to optimize it
The easiest way to optimize your gross profit margin is by increasing your end prices. If that's not possible, focus on your COGS.
How to calculate gross profit margin?
Gross profit margin is calculated by subtracting your cost (e.g., the cost of sourcing the product from your wholesaler) from your revenue (e.g., the product’s final price), then dividing that number by the revenue. Multiply the result by 100 to express it as a percentage.
Profit margin FAQs
Profit margin is the percentage of revenue remaining after all costs and expenses have been deducted. It indicates how efficiently your online store is generating profit relative to its revenue.
The ideal gross profit margin typically ranges between 60% to 80%. However, this depends on your industry, product niche, competition, and market strategy.
Gross profit margin refers to revenue minus the cost of goods sold (COGS), expressed as a percentage. It measures product profitability before accounting for operating expenses.
Net profit margin is the percentage of revenue remaining after deducting all expenses, including COGS, operating expenses, taxes, and interest. It indicates overall business profitability.
You can improve your profit margin by:
- Increasing prices strategically
- Negotiating better deals with suppliers
- Reducing shipping and fulfillment costs
- Optimizing marketing and ad spend
- Upselling and cross-selling additional products
Consistently monitoring your profit margin is essential because it provides clear insight into your business’s financial health, enabling you to make informed decisions about pricing, marketing strategies, and cost management.
By regularly tracking margins, you can quickly identify areas of inefficiency or overspending, allowing you to take immediate corrective actions. Ultimately, maintaining visibility of your profit margin helps ensure sustainable profitability and supports the long-term growth of your e-commerce business.