profitability
Gross Margin
Revenue minus COGS, expressed as a percentage - how much is left after the product itself is paid for, before operating costs.
Formula
Gross Margin % = (Revenue - COGS) / Revenue x 100
Gross margin is the first profitability check. A 60% gross margin means $60 of every $100 in sales is available to cover shipping, ads, team, and everything else.
High gross margin is a prerequisite for profitable scaling. If gross margin is 30%, you cannot afford paid ads, 3PL fees, returns and overhead at scale. Brands that scale on thin gross margins hit a ceiling fast.
Gross margin is different from contribution margin. Gross margin stops at COGS. Contribution margin goes further and subtracts shipping, platform fees, and ad cost too. Both matter, but for unit economics, contribution margin is the honest number.
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