Gross Margin

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.