E-commerce Glossary
What is Gross Profit Margin?
Gross profit margin is a financial metric that reveals the proportion of money left over from revenues. Learn the gross profit margin formula.
Definition
Gross profit margin is the percentage of revenue that exceeds a company’s costs of goods sold (COGS). It illustrates how efficiently a company uses labor and supplies in the production process.
People Also Ask: How do you calculate gross profit margin?
The Gross Profit Margin formula is:
Gross Profit Margin = ((Revenue - COGS) / Revenue) x 100
People Also Ask: What is a good gross profit margin?
A good gross profit margin varies by industry. For a SaaS business, 80% is standard. For e-commerce retail, a healthy gross profit margin typically sits between 40% and 60%. If your gross margin is lower than 40%, you may struggle to cover the high variable costs of digital marketing (CAC) and shipping.
People Also Ask: What is the difference between gross profit and net profit?
Gross profit only subtracts the direct costs of producing the item (COGS) from the revenue. Net profit subtracts everything—including COGS, plus taxes, interest, marketing (CAC), warehouse rent, and marketplace fees (like Etsy or Amazon fees). Net profit is the actual money you put in your pocket at the end of the day.
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