Gross Margin
How much of each euro of sales is yours to work with before anything else is paid.
What it means
Gross Margin is Gross Profit divided by Total Sales — the share of each euro left once the goods are paid for. Product cost is the only thing subtracted here: shipping, payment fees, ads and salaries all still have to come out of what's left. It's the top rung of a three-step ladder, above Contribution MarginContribution MarginProfit left after variable costs to fund the business.30% or more is healthy and Net Profit MarginNet Profit MarginWhat you keep after every cost; the truest read on health.15% or more is healthy.
Show the math
Formula and a worked example
Gross Profit is Total Sales minus the cost of the goods you sold in the period — the unit cost you set in Cost Settings, times the units that shipped.
Total Sales is what customers actually paid, after discounts and returns.
Worked example. A month brings €120,000 of Total Sales on 1,000 orders. The goods behind those orders cost €48,000, so Gross Profit is €72,000. Gross Margin = 72,000 ÷ 120,000 = 60%.
That same month you also paid €10,000 of shipping, €3,000 of payment fees and €30,000 of Ad Spend. None of them touch this number. One rung down, Contribution Margin takes off tax, shipping and Ad Spend: shipping and Ad Spend alone drop it to 27%, and tax pulls it lower still. A 60% Gross Margin sitting directly above a number less than half its size is why reading this one alone is never enough.
It answers the question
Before you've shipped, advertised or paid anyone, how much of the price is yours? That gap is the budget every other cost has to come out of, so it caps how hard you can afford to grow.
Why it matters
Everything you spend to grow comes out of this. Ads, delivery, packaging, payment fees and staff all have to fit inside the gap between your cost and your price, and a store at 30% has half the room of a store at 60% to pay for the same growth.
It's also the slowest number on the page to change, which makes it the most valuable one to fix. A discount you stop today moves it this week; a supplier price you renegotiate moves it for years.
What good looks like
Judge this against your model. 60% suits a brand that makes or specifies its own products; a store reselling someone else's usually runs lower, so judge that store against its own trend. Watch % Product Discounts% Product DiscountsHow heavily a product is marked down.Under 8% is healthy alongside it — heavier discounting lowers Total Sales, so this falls even when your supplier hasn't moved a cent.
How to improve it
| Lever | What you do | Expect | How long | Watch out for |
|---|---|---|---|---|
| Fast Stop discounting your thinnest products | Exclude your lowest-margin ranges from every active code | Gross Margin up 1–3 points | 2 weeks | Units fall on those ranges first, and shoppers who came for the code often leave the basket entirely. |
| Fast Nudge prices on slow movers | Raise price 5–10% where demand isn't driven by the price tag | Gross Margin up 2–4 points | 2–4 weeks | Conversion drops on those pages, and your cost per sale on the same products rises with it. |
| Slow Renegotiate supplier cost | Re-quote your top 10 products, or commit to deeper orders for a better unit price | Gross Margin up 3–8 points | 1 quarter | Cash gets locked into stock, and you carry the loss if that product stops selling. |
| Slow Change what you promote | Move homepage, email and ad attention onto your widest-margin ranges | Same sales, more Gross Profit | 1–2 quarters | Total Sales usually grows more slowly. Your best-selling product is often your worst-margin one, and demoting it is felt immediately. |
Every lever costs something somewhere. The last column is the one to read twice.
Read it with
Gross Margin alone tells you your markup. Next to your discounting, it tells you whether a change came from sourcing or from promotions.
Priced it right
You sold at full price and kept more of it. Check that order volume held — margin on fewer sales is a smaller business.
The mix did the work
You discounted more and still kept more, so your sales shifted towards better products. Worth repeating on purpose.
It's sourcing, not promotions
Discounts came down and margin still fell. Something moved in what your goods cost or in which ones sell.
You bought the revenue
The promotion shifted units at a price that doesn't pay. Sales look fine and the money isn't there.
The gap between them is everything that isn't product cost — tax, delivery, fees and ads. Hold Gross Margin steady while the gap widens and you've found a store whose sourcing is fine and whose cost of selling is climbing.
A wide margin can be undone by a heavy box. Together they tell you whether your best-margin range is also your most expensive to deliver — the products that look profitable on the shelf and aren't on the doorstep.
Common misreads
It's measured before shipping, fees, tax, ads, rent and salaries. A store at 65% can still lose money once acquisition is counted. Net Profit Margin is the number that settles it.
Not necessarily. Heavier discounting, a spike in returns, or sales shifting towards cheaper products all pull it down while your supplier cost sits exactly where it was. Check % Product Discounts and your product mix before you send that email.
It means no cost is set for it in Cost Settings. Zero cost, perfect margin, wrong number. Every product missing a cost inflates the store total along with it.
Also called
Gross Profit Margin · gross margin ratio · product margin · margin after COGS
See yoursYour Gross Margin for the period, with the product cost behind it and a country-by-country breakdown underneath.
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