Gross margin is the share of each sale left after the cost of the product. Enter your cost and price to see it, or pick a margin target and get the price that delivers it.
Gross margin calculator
Product cost only. Fees, shipping and ads aren't included, so this is gross, not net.
A $20 product priced at $33.33 has a 40% gross margin, or $13.33 of gross profit. To hit a target instead, divide cost by 1 minus the margin: $20 ÷ 0.6.
Gross margin covers only the direct cost of what you sell, which for an ecommerce brand means product and inbound freight. It doesn't include payment fees, outbound shipping, marketing, software or salaries. That's why it's called gross.
It's still the number that sets a ceiling on everything else. If your gross margin is thin, there's little room left to pay for ads or absorb returns, however well the store converts.
| Measure | Formula | Costs counted |
|---|---|---|
| Gross margin | (price − cost) ÷ price | Product cost only |
| Net margin | (price − all costs) ÷ price | Also fees, shipping, marketing and overheads |
| Markup | (price − cost) ÷ cost | Product cost only, measured against cost |
The markup calculator converts between markup and margin. For a full per-order view, use the Shopify profit margin calculator.
Work out your break-even ROAS from gross margin: divide 1 by the margin. A 40% margin needs a 2.5x return just to cover the product, before any other cost. The break-even ROAS calculator does this for you, including a target-profit mode.