Gross Profit Calculator
Calculate gross profit and margin from your revenue and COGS. See if you're above or below the industry average for your vertical.
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What is Gross Profit?
Gross profit is the revenue your business retains after subtracting the direct cost of goods sold (COGS). It is the most fundamental measure of product-level profitability and tells you whether your pricing covers the cost of what you sell.
The formula is: Gross Profit = Revenue - COGS
For example, if your Shopify store generates $100,000 in monthly revenue and your cost of goods sold is $40,000, your gross profit is $60,000. This $60,000 is what you have available to pay for marketing, salaries, software, rent, and every other operating expense. If your gross profit is too low, no amount of cost-cutting on the operating side will save the business.
COGS includes all direct costs tied to producing or acquiring your products: raw materials, manufacturing labor, packaging, inbound freight, and import duties. It does not include indirect costs like marketing, office rent, or software subscriptions.
Gross Profit vs Net Profit
Gross profit and net profit measure different things. Getting them confused leads to poor decisions about pricing, spending, and growth.
Gross profit only subtracts COGS from revenue. It tells you if your products are priced correctly relative to what they cost to produce or acquire. A healthy gross profit means your unit economics are sound.
Net profit subtracts everything: COGS, marketing, salaries, rent, software, payment processing fees, taxes, and interest. It tells you what the business actually keeps after all expenses.
A typical DTC ecommerce store might have a 55% gross margin but only a 10-15% net margin. The gap is consumed by marketing (often 20-35% of revenue), fulfillment and shipping (8-15%), platform fees (3-5%), and other operating costs. This is why gross margin matters so much: if your gross margin is only 30%, you have very little room to fund growth and still remain profitable.
How to Improve Gross Margin
1. Negotiate Better Supplier Terms
Your COGS is largely determined by what you pay suppliers. Negotiate volume discounts, longer payment terms, or explore alternative manufacturers. Even a 5% reduction in supplier costs on a 50% margin business improves gross margin by 2.5 percentage points, which drops straight to the bottom line.
2. Raise Prices Strategically
Most ecommerce brands underprice. Test price increases on your best-selling products by 5-10%. In many cases, conversion rate barely changes because customers buy on perceived value, not cost. A 10% price increase on a product with 50% margin improves gross margin to 55% with no additional cost.
3. Optimize Shipping and Fulfillment
Inbound freight and fulfillment are often hidden COGS killers. Optimize packaging dimensions to reduce dimensional weight charges, consolidate shipments, and negotiate carrier rates. Switching from air to sea freight can reduce inbound shipping costs by 60-80% if your lead times allow it.
4. Cut Low-Margin Products
Not every SKU deserves a spot in your catalog. Identify products with gross margins below your target threshold and either raise their prices, renegotiate supplier terms, or discontinue them. Focusing your marketing spend on high-margin products improves blended gross margin and overall profitability.
5. Bundle to Increase Perceived Value
Product bundles let you combine high-margin items with lower-margin accessories at a price that feels like a deal. Customers perceive higher value, your AOV increases, and the blended margin on the bundle is typically higher than selling each item separately. This is especially effective for replenishable products like skincare and supplements.
Lifetimely by Amp tracks real gross profit and margins across every product and order automatically, so you always know your true profitability.
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