What is Net Margin?
Net margin is the profit percentage remaining after all costs (COGS, ads, shipping, operations). The e-commerce median is just 3% — every percentage point matters.
Formula
Example
If monthly revenue is $50,000 and all costs (COGS + ads + shipping + payment fees + operations) total $47,500, net profit = $2,500, and net margin = ($2,500 / $50,000) × 100 = 5%.
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Related Terms
Gross Margin
Gross margin is the difference between revenue and COGS, as a percentage. With the median e-commerce net profit at 3%, this number determines viability.
COGS (Cost of Goods Sold)
COGS is the direct cost of products sold: purchase price + inbound shipping + duties. The landed cost is the number you actually need to know.
Net Profit
Net profit is total revenue minus all costs (COGS, ads, shipping, wages, taxes, everything). The "true" bottom line — what's actually left.
Contribution Margin
Contribution margin shows how much a product "contributes" toward covering fixed costs after all variable costs are deducted. The evolved version of margin.