Know your gross margin.
Calculate your gross margin in seconds and understand how much profit remains after product costs before operating expenses, discounts and shipping.
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AI Gross Margin Analysis
Enter your numbers to receive an instant gross margin analysis.
Gross margin is only the beginning.
MarginLab also monitors operating costs, discounts, refunds, shipping and real net profitability across your Shopify store.
How to use this gross margin calculator
Enter your revenue and cost of goods sold. The calculator instantly shows your gross profit and gross margin percentage, helping you understand how profitable your products are before operating expenses, discounts, refunds and shipping.
Start with total sales or revenue for the period, product or store you want to analyze.
Enter the cost of goods sold, including the direct cost of purchasing or producing the products.
Use the result to understand whether your products have enough margin before other business costs.
Gross margin formula
Gross margin measures how much money remains after paying the direct cost of producing or purchasing your products. It is one of the most important profitability metrics for ecommerce businesses and retailers.
Gross margin equation
The higher your gross margin, the more money remains available to cover operating expenses, marketing, salaries and generate profit.
What is Cost of Goods Sold (COGS)?
COGS includes only the direct costs required to sell your products. It does not include advertising, software, shipping, refunds or operating expenses.
Gross margin example
What is a good gross margin?
A good gross margin depends on your industry, supplier costs, product category and pricing strategy. For many ecommerce and retail businesses, gross margin is used to understand whether products are profitable before operating expenses.
Low
Product costs are high compared with revenue. Pricing or sourcing should be reviewed.
Average
The product may be profitable, but there may be limited room for marketing, refunds and overhead.
Healthy
A healthy gross margin gives the business more flexibility to cover operating costs and grow.
Strong
Strong gross margins create more room for discounts, advertising and profit after expenses.
- Gross margin shows product profitability before operating expenses.
- High gross margin does not always mean high net profit.
- Low gross margin can make paid ads and discounts difficult to sustain.
- MarginLab helps merchants monitor gross margin together with real net profitability.
Common gross margin mistakes
Many businesses calculate gross margin incorrectly because they misunderstand what should be included in Cost of Goods Sold (COGS). These are the most common mistakes.
Incorrect product costs
Using outdated supplier prices or inaccurate product costs can significantly distort your gross margin calculations.
Confusing COGS with operating costs
Gross margin only includes direct product costs. Expenses such as rent, salaries, software and advertising belong to net profit calculations.
Looking only at revenue
Growing revenue does not always mean higher profitability. A business can increase sales while gross margin steadily declines.
Ignoring supplier cost increases
Even small increases in supplier prices can reduce gross margin over time if product prices are not adjusted accordingly.
Why gross margin matters in ecommerce
Gross margin is one of the first indicators of product profitability. If gross margin is too low, every sale generates less money to cover advertising, salaries, software, shipping and other operating expenses.
What affects gross margin?
- Increasing supplier prices.
- Products priced too aggressively.
- Higher manufacturing costs.
- Changes in packaging or sourcing costs.
- Poor pricing strategy across product categories.
Gross margin is only the beginning
A healthy gross margin does not always mean a profitable business. Operating costs, marketing spend, refunds and shipping expenses can significantly reduce your final net profit.
MarginLab goes beyond gross margin by analyzing net profit, discounts, refunds, shipping costs and product profitability across your entire Shopify store.
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Calculate net profit after operating expenses and other business costs.Frequently asked questions
These are some of the most common questions about gross margin, product costs and ecommerce profitability.
What is gross margin?
Gross margin is the percentage of revenue left after subtracting cost of goods sold. It shows how profitable your products are before operating expenses, marketing, refunds and shipping.
How do you calculate gross margin?
Gross margin is calculated by subtracting cost of goods sold from revenue, dividing the result by revenue, and multiplying by 100.
What is a good gross margin?
A good gross margin depends on your industry and product category. For many ecommerce businesses, 40% to 60% is a healthy range.
What is the difference between gross margin and net margin?
Gross margin only includes revenue and cost of goods sold. Net margin includes operating costs, discounts, refunds, shipping, software, salaries and other business expenses.
Can gross margin be high while profit is low?
Yes. A business can have strong gross margin but low net profit if operating costs, advertising, refunds or shipping expenses are too high.
Does MarginLab calculate gross margin automatically?
Yes. MarginLab helps Shopify merchants monitor product costs, gross margin, net profit and margin risks automatically across their store.
Gross margin is only
part of the profitability story.
A healthy gross margin is a great starting point, but it doesn’t show your real business profitability. MarginLab automatically combines gross margin with operating costs, discounts, refunds, shipping expenses and product performance, giving Shopify merchants a complete view of where profit is earned—and where it is lost.
Product Profitability
See which products generate strong gross margins and which ones reduce overall profitability.
Real Net Profit
Go beyond COGS by including operating expenses, discounts, refunds and shipping costs.
AI Profit Intelligence
Receive automated insights to improve pricing, margins and long-term profitability.
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