Gross Margin
Gross margin is the share of revenue left after paying the direct cost of the goods you sold.
Gross margin shows how much of each sale you keep to cover everything else: marketing, staff, software and profit. It is always expressed as a percentage of the selling price, which is why it can never reach 100%.
Retailers and ecommerce brands use gross margin to compare products and to decide how much they can spend on ads and discounts. A product with a low gross margin needs high volume to be worth selling.
Formula
Gross profit = Revenue − Cost of goods sold
Gross margin % = Gross profit ÷ Revenue × 100
Example
A product sells for 50 and costs 20. Gross profit is 30, so gross margin is 30 ÷ 50 = 60%.
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Common questions
Is gross margin the same as markup?
No. Margin divides profit by price; markup divides profit by cost.
What is a good gross margin?
Many online brands aim for 50% or more; wholesale businesses often work on less.