Gross Margin vs Net Margin for Ecommerce Sellers

Gross margin usually compares selling price with product cost or cost of goods sold. It is useful, but it does not include platform fees, payment processing, shipping, ads, refunds, and overhead.

A product with strong gross margin can still have weak net profit margin.

Net profit margin = net profit / revenue. Net profit should subtract all meaningful order-level costs and allocated overhead.

For ecommerce sellers, net margin is better for deciding whether a SKU deserves more inventory or ad budget.

Use gross margin to screen product economics quickly. Use net margin before making operating decisions.

If gross margin is healthy but net margin is weak, the issue is often shipping, ads, returns, or channel fees.