Your Numbers
Gross Margin
64.0%
$31.99 per unit
Net Margin
58.5%
$29.24 per unit
Markup
233.3%
Over cost of goods
Profit per Unit
$29.24
After all costs
Profit at Scale
Projected totals at different sales volumes
| Units Sold | Revenue | Total Cost | Profit |
|---|---|---|---|
| 10 | $499.90 | $207.50 | $292.40 |
| 50 | $2,499.50 | $1,037.48 | $1,462.02 |
| 100 | $4,999.00 | $2,074.95 | $2,924.05 |
| 500 | $24,995.00 | $10,374.76 | $14,620.25 |
| 1,000 | $49,990.00 | $20,749.51 | $29,240.49 |
What is Profit Margin?
Profit margin measures how much of each dollar in revenue a business keeps as profit after costs. It is expressed as a percentage and is one of the most important financial metrics for any ecommerce business. A healthy profit margin means you have room to invest in growth, handle unexpected costs, and build a sustainable business.
Gross Margin vs Net Margin
Gross margin only accounts for the direct cost of goods and shipping. It tells you how much you make before operating expenses. The formula is:
Gross Margin = (Revenue - COGS - Shipping) / Revenue x 100Net margin includes all costs: COGS, shipping, payment processing fees, taxes, refunds, and any other expenses. This is the number that matters for real profitability. If your gross margin is 60% but your net margin is 5%, you need to look at where the other 55% is going.
How to Calculate Profit Margin
The basic formula for net profit margin is:
Net Margin = (Revenue - All Costs) / Revenue x 100For ecommerce, “all costs” includes product cost, shipping, payment processing fees (typically 2.9% + $0.30 on Shopify), platform fees, refund losses, taxes, and any marketing costs allocated per unit. Enter each relevant cost in the available fields and use Other Costs for additional percentage assumptions. Unentered expenses are not included.
Margin scenarios from your own costs
Compare products using the same cost definition. At $100 revenue, modeled total costs of $60, $80 and $95 leave margins of 40%, 20% and 5% respectively. These illustrative scenarios are not averages for ecommerce, dropshipping or any other industry.
How to Improve Your Margins
There are two paths: increase revenue per unit or decrease costs. Here are practical strategies:
- Negotiate supplier pricing — order in bulk or switch to a cheaper supplier to lower COGS.
- Increase average order value — use bundles, upsells, and cross-sells to get more revenue per transaction.
- Reduce refund rate — better product descriptions, sizing guides, and quality control reduce returns.
- Optimize shipping — consolidate shipments, use regional warehouses, or negotiate carrier rates.
- Lower processing fees — Shopify Advanced has lower card rates. High-volume stores can negotiate with processors.
Formula and worked example
Profit margin (%) = profit ÷ revenue × 100
An item sold for $100 with $60 in product cost has $40 gross profit and a 40% gross margin. Its markup is $40 ÷ $60 × 100 = 66.67%. Add other expenses to estimate the margin after those costs.
Frequently asked questions
What is the difference between margin and markup?
Margin divides profit by selling price. Markup divides profit by cost. A 50% markup on a $20 cost gives a $30 price and a 33.33% margin.
Does this show accounting net profit?
The result reflects the costs you enter. Include all relevant expenses for a complete model; unentered overhead, taxes or operating costs are not automatically included.
Browse all free ecommerce calculators to compare advertising, pricing and profit assumptions.
More free ecommerce calculators
ROAS Calculator
Calculate return on ad spend as a ratio or percentage. Enter ad revenue and spend, then add product costs, fees and refunds to estimate campaign contribution.
Break-Even ROAS Calculator
Find the minimum ROAS needed to cover your product, shipping, processing and refund assumptions. Calculate break-even ad spend and target profit margins.
Shopify Profit Calculator
Estimate Shopify profit from price, product cost, shipping, payment fees, refunds, subscription and apps. Enter your actual fee and order-volume assumptions.
Dropshipping Profit Calculator
Estimate dropshipping profit per order after supplier costs, payment fees, advertising and overhead. Model bundles, profit margins and break-even sales volume.
CPA Calculator
Calculate cost per acquisition from ad spend and conversions. Estimate break-even purchase CPA from order value and costs, with clear CPA versus CAC definitions.
Conversion Rate Calculator
Calculate website conversion rate from visitors and purchases. Model orders and revenue at different conversion rates using your traffic and average order value.
Customer Lifetime Value Calculator
Estimate customer lifetime value from order value, purchase frequency and lifespan. Compare revenue LTV, gross-profit LTV and the LTV:CAC ratio.
Product Pricing Calculator
Calculate a selling price from product costs and a target margin. Include payment fees and modeled ad costs, then compare price, markup and profit scenarios.
Ad Budget Calculator
Plan an advertising budget from revenue, average order value, cost per click and conversion rate. Estimate required traffic, orders and acquisition costs.
VAT Calculator
Add VAT to a net price or remove VAT from a gross price. Enter the applicable rate to calculate the VAT amount and the price before or after VAT.
Offer & Bundle Calculator
Compare ecommerce offers and bundles using selling prices, product costs and acquisition assumptions. Estimate profit per offer before choosing a promotion.