What is a good profit margin for ecommerce?

A good gross profit margin for ecommerce varies significantly by industry. According to the 2025 DTC Mega Report, the median contribution margin across Shopify stores is 48%. Your target will depend on your category, pricing model, and cost structure.

What is the difference between markup and margin?

Margin is profit divided by selling price. Markup is profit divided by cost price. A product costing $10 and selling for $25 has a 60% margin but 150% markup. Margin can never exceed 100%, while markup has no upper limit.

Why is my net profit margin so much lower than my gross margin?

Gross margin only accounts for COGS. Net margin subtracts platform fees, shipping, returns, and marketing spend. A high gross margin can easily become a thin net margin once all operating costs are included.

How can I reduce my cost of goods sold (COGS)?

Negotiate volume discounts, source from multiple suppliers, reduce packaging costs, minimize waste, and consider nearshoring. Top DTC brands in the 2025 Mega Report keep COGS under 15% of revenue.

How often should I recalculate my profit margins?

Review margins at least monthly, ideally in real-time at the product and order level. A 2% margin erosion left unchecked for 6 months can cost tens of thousands in profit.

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