What is profit margin?
Profit margin is the share of each sale you keep after the cost of the item. A product that costs you $40 and sells for $100 has a 60% gross margin and a $60 gross profit per unit. Markup on the same product is 150%, because $60 is 150% of the $40 cost.
The margin your dashboard shows is not the margin you keep
Gross margin ignores everything that happens after the sale. For an online store, four costs sit between the headline margin and the bank: payment processing, shipping you absorb, refunds and chargebacks. The calculator's advanced panel adds each one.
Headline margin
60.0%
$40 cost, $100 price
Processing
−3.2%
2.9% + $0.30
Refund leakage
−0.1%
3% of orders, fee kept
Contracargos
−0.6%
0.5% of orders at $15 fee
Real margin
56.1%
before shipping and CAC
Add $8 shipping and $12 customer acquisition cost and the real margin on that $100 product is 36%. Pricing decisions made on the 60% number are off by 24 points.
What is a good profit margin?
It depends on the category and on whether you measure gross or net.
| Categoría |
Typical gross margin |
Typical net margin |
| Apparel and fashion |
45% to 60% |
4% to 8% |
| Consumer electronics |
20% to 35% |
2% to 5% |
| Beauty and cosmetics |
55% to 70% |
8% to 12% |
| Food and beverage DTC |
35% to 50% |
3% to 7% |
| Digital products and courses |
80% to 95% |
20% to 40% |
| SaaS |
70% to 85% |
10% to 25% |
| Dropshipping |
15% to 30% |
2% to 5% |
Ranges are broad industry figures for US ecommerce; your own historical numbers are the better baseline. For a public-company reference point, NYU Stern's January 2026 dataset puts apparel at a 56.9% gross and 3.9% net margin, and general retail at 33.2% gross and 5.6% net.
Thin net margins are why a 0.5% chargeback rate matters: at a 5% net margin, each lost $100 dispute wipes out the profit on 20 orders.
Gross, operating and net profit margin
Gross margin is the product-level number. Operating and net margin tell you whether the business makes money. Each one subtracts more.
| Margin |
Formula |
Example on $100,000 revenue |
| Gross margin |
(revenue − COGS) ÷ revenue |
$40,000 COGS: 60% |
| Operating margin |
(revenue − COGS − opex) ÷ revenue |
$30,000 opex: 30% |
| Net margin |
(revenue − all costs incl. fees, disputes, tax) ÷ revenue |
$6,900 payment costs: 23.1% |
Use gross margin to price a SKU and net margin to judge the store. The net profit calculator (linked below) breaks the payment costs out line by line.
Margin by sales channel
The same product keeps a different margin on each channel, because every marketplace takes its cut before you see the money. Here is a $40 product sold at $100 on four channels, before shipping and ads.
Own store (card processing)
56.8%
2.9% + $0.30, $3.20 per sale
Etsy
50.1%
$0.20 listing + 6.5% transaction + 3% + $0.25 processing
eBay
46.0%
13.6% final value fee + $0.40 per order
Amazon
45.0%
15% referral fee, most categories
Amazon's referral fee includes payment processing; FBA fulfillment is on top. The 11-point gap between an own store and Amazon is the price of the marketplace's traffic. Price marketplace listings separately rather than copying the store price.
What a discount does to margin
A discount comes straight out of margin, so the sales lift has to be large to pay for it. The break-even lift is margin ÷ (margin − discount), minus one.
| Gross margin |
10% discount needs |
20% discount needs |
30% discount needs |
| 40% |
+33% more units |
+100% |
+300% |
| 60% |
+20% |
+50% |
+100% |
| 80% |
+14% |
+33% |
+60% |
A 20% site-wide sale on a 40% margin store has to double unit sales just to hold profit flat. Enter the discounted price in the calculator to see the margin it leaves.
Margin vs markup
Markup is what you add to cost to set the price. Margin is what you keep from the price. The same price gives different numbers for each, and the gap grows as margin rises.
| Markup |
Margin |
| 25% |
20% |
| 50% |
33.3% |
| 100% |
50% |
| 150% |
60% |
| 200% |
66.7% |
| 300% |
75% |
A common pricing mistake is applying a 50% markup and reporting a 50% margin. The margin is 33%. Use the Markup % slider in the calculator to see both at once.
How to improve margin without raising prices
Cut payment leakage firstRefunds and chargebacks are the only margin line with a near-zero cost to fix. A clear refund policy and fast replies prevent most disputes.
Move to interchange-plus processing above $20k a monthTypically saves 0.3 to 0.6 points on every sale.
Set a free-shipping threshold above your AOVShipping you absorb on a $45 order costs more margin than on a $90 order.
Bundle low-margin items with high-margin onesBlended margin rises and shipping cost per item falls.
Negotiate COGS at volume breaksA 5% COGS reduction on a 40% cost base adds 2 points of margin.
Re-price SKUs below 30% real marginUse the calculator's real-margin line, not the headline.
Preguntas frecuentes
How do I calculate profit margin?
Subtract cost from price, divide by price, multiply by 100. A $100 product that costs $40 has a (100 − 40) ÷ 100 = 60% margin.
What is the difference between profit margin and markup?
Margin divides profit by the selling price; markup divides profit by the cost. A $40 cost sold at $100 is a 60% margin and a 150% markup.
What is a good profit margin for an online store?
Gross margins of 40% to 60% are common for physical products; net margins after all costs are usually 5% to 10%. Digital products and SaaS run far higher.
How do payment fees affect profit margin?
A 2.9% + $0.30 processing fee costs 3.2 points of margin on a $100 sale and 3.5 points on a $50 sale. Refunds and chargebacks add another 0.5 to 2 points depending on your rates.
How do chargebacks affect margin?
A lost chargeback costs the sale, the processing fee and a $15 to $25 dispute fee. At a 0.5% dispute rate on a $100 product, that is about $0.60 per order across every order, or 0.6 points of margin.
How do I price a product for a target margin?
Divide cost by (1 − target margin). For a 50% margin on a $30 cost: 30 ÷ 0.5 = $60. Add processing fees to the cost first if you want the margin after fees.
What is a 30% margin on $100?
A 30% margin on a $100 sale is $30 of gross profit, which means the item can cost at most $70. The same $100 sale at a 30% markup is different: the cost would be $76.92 and the margin only 23%.
How do I calculate a 70% profit margin?
Divide the cost by 0.30. A $40 cost priced at 40 ÷ 0.3 = $133.33 gives a 70% margin, which is a 233% markup. After a 2.9% + $0.30 processing fee the real margin on that price is about 66.9%.
How do I calculate net profit margin?
Subtract every cost from revenue, including COGS, operating expenses, payment fees, refunds, chargebacks and tax, then divide by revenue. A store with $100,000 revenue and $76,900 of total costs has a 23.1% net margin.
Fuentes
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