Gross Margin
Gross profit as a percentage of revenue. Tells you how much of each sale is left after paying for the product itself. For most Shopify stores, a healthy gross margin sits somewhere between 40% and 70%.
Example
$20K revenue, $8K in product costs. Gross profit = $12K. Gross margin = 60%. You keep 60 cents of every dollar before overhead.
Why It Matters
If your gross margin is below 40%, you're almost certainly losing money after fees, shipping, and refunds eat into what's left. Most failed Shopify stores didn't have a revenue problem — they had a pricing problem they could have caught by watching this number.
Pro Tip
Calculate gross margin for every SKU individually. You'll almost certainly find products that look like they're selling well but are actually subsidizing losses on others. Kill or reprice the bottom 20% — it's faster than finding new customers.
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