Gross profit
Gross profit is what is left of revenue after subtracting the cost of the goods sold. It is an amount of money; gross margin is the same thing as a percentage.
Updated
- Formula
- gross profit = revenue − cost of goods sold
Per unit
A linen throw sells for $68.00 and its cost of goods is $22.60.
$68.00 − $22.60 = $45.40 gross profit per unit
Per period
Sell 500 throws in a month: revenue $34,000, cost of goods $11,300, gross profit $22,700.
What it does and does not tell you
Gross profit shows whether the product itself makes money before the costs of selling it. It does not include pick and pack, payment fees, shipping or ads, so a healthy gross profit can still leave little once those are paid. Contribution margin is the figure that includes them.
Where it goes wrong
Gross profit is only as accurate as the cost behind it. If 8% of your variants have no cost, 8% of your catalog is reporting its full revenue as profit. Cogsy lists those variants under its missing cost filter.
Questions
- What is the difference between gross profit and net profit?
- Gross profit subtracts only the cost of the goods. Net profit subtracts everything else as well, including marketing, fees, salaries, rent and tax.
- Can gross profit be negative?
- Yes, when a product sells for less than it cost. That happens on clearance, and by accident when a cost rises and the price does not follow.
Related
Glossary
Gross marginGross margin is gross profit as a percentage of revenue. The formula, a worked example, how it differs from markup, and why a missing cost inflates it.
Glossary
Cost of goods sold (COGS)COGS is the direct cost of the products you sold in a period. What it includes, what it leaves out, the formula, and a worked example for a Shopify store.
Glossary
Contribution marginContribution margin is the price minus every cost that varies with a sale, including fulfilment and payment fees. The formula and a worked ecommerce example.