The share of each sale left after paying for the product itself. It ignores rent, salaries, marketing and other costs.
Formula
Gross margin = (sales − cost of goods sold) ÷ sales × 100
Example
Meera sells ₹4,00,000 of clothes that cost her ₹1,20,000. Her gross profit is ₹2,80,000 and her gross margin is ₹2,80,000 ÷ ₹4,00,000 = 70%.
How you'll hear it
“With a 70% gross margin we can afford a lower ROAS than the electronics client.”
Don't confuse it with
- Contribution margin: also subtracts shipping, payment fees and other per-order costs.
- Markup: profit as a share of cost, not of price.
Related terms
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Sources
- What Is Gross Margin? Formula and How To Calculate It, Shopify, 2026