Margin Analysis
Gross Margin
By Herzel MishelFounder, AgentisLast reviewed
Definition
The percentage of revenue remaining after subtracting the cost of goods sold, a foundational profitability metric that excludes operating expenses, taxes, and interest.
Gross margin is calculated as (Revenue − COGS) ÷ Revenue, expressed as a percentage. It represents the portion of each dollar of sales available to cover operating expenses and generate profit. In ecommerce, gross margin varies dramatically by category: apparel typically runs 50–65%, electronics 15–25%, and consumables 30–45%. However, headline gross margin figures often mask per-order variability caused by discount stacking, freight cost differentials, and COGS decay. A merchant with a reported 45% gross margin may have individual orders ranging from −5% to 70%. This distribution matters more than the average, because negative-margin orders destroy value that profitable orders must subsidize. Effective margin intelligence requires calculating gross margin at the order level in real time, not as a monthly aggregate.
Related Terms
Margin Analysis
Contribution Margin
The revenue remaining after deducting all variable costs associated with fulfilling an order, including COGS, shipping, payment processing fees, and pick-and-pack labor.
Margin Analysis
Order Profitability
The true net profit of a single order after deducting all variable costs: COGS, shipping, discounts, payment fees, fulfillment labor, and return allowances.
Cost Management
Landed Cost
The total cost of a product delivered to the customer, including COGS, freight, duties, tariffs, insurance, and handling fees.
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