Gross Margin

What is Gross Margin?

Gross margin is one of the most important profitability metrics for e-commerce sellers. It represents the percentage of revenue that remains after subtracting the direct costs of producing or purchasing the goods you sell (COGS).

Unlike net margin, gross margin does not account for operating expenses like marketing, shipping, or overhead — it focuses purely on your product-level profitability.

Why Gross Margin Matters

Gross margin tells you how much room you have to cover your operating costs and still make a profit. A healthy gross margin gives you the flexibility to invest in marketing, hire staff, or absorb unexpected costs.

For e-commerce businesses, tracking gross margin per product helps identify which items are truly profitable and which ones are dragging your margins down.

How to Improve Gross Margin

• Negotiate better supplier pricing or buy in larger quantities
• Increase prices where the market allows
• Reduce COGS by optimizing packaging or sourcing
• Focus on high-margin products in your marketing spend