Profit margin

Gross margin is revenue minus cost of goods sold, as a percentage. It tells you whether the products themselves have room to make money. Net margin takes out everything else too - payment fees, shipping you absorb, returns, ad spend and fixed costs - and tells you whether the business makes money.

The gap between the two is where stores get surprised. A 60% gross margin can shrink to a single-digit net margin once ads and shipping are counted, and the store owner watching gross margin never sees it happen.

There is no universal number, and be suspicious of anyone quoting one. Margin depends on what you sell and how you sell it: digital products carry almost no product cost, dropshipping stacks thin margins against paid traffic, and own-brand physical products sit in between, with ad spend usually the deciding cost.

A more useful test than any benchmark: is your net margin positive after every cost including ads, is it stable or improving month over month, and does it survive your return rate? A store that can answer yes to all three is healthy at almost any absolute number. Compare against your own history - it is the only benchmark built on your actual costs.

Net margin is net profit divided by revenue, times 100. The maths is trivial; the work is collecting every cost so the profit number is real. Miss the payment fees or the returns and your margin reads a few points better than it is.

You can test scenarios in the free profit margin calculator, and see your store's actual measured margin, per order and per month, in Easy Profit Calculator.