Shopify profit margin calculator

How to read these results

Gross margin is the selling price minus the cost of goods. It shows what your product earns before everything else, and it is the figure most suppliers and marketplaces talk about.

Contribution margin also subtracts shipping and payment fees: it is what each order really leaves you before marketing. Net profit per order then subtracts your marketing cost per order, and net profit margin expresses it as a share of the selling price.

Profit per month multiplies net profit per order by your number of orders, minus your fixed costs. The last line gives the selling price that would reach your target net margin with the same costs.

Profit margin formulas

• Gross margin = selling price − cost of goods. Gross margin rate = gross margin ÷ selling price.
• Contribution margin = selling price − cost of goods − shipping − payment fees.
• Net profit per order = contribution margin − marketing cost per order. Net profit margin = net profit ÷ selling price.
• Markup = (selling price − cost of goods) ÷ cost of goods.
• Price for a target margin = (cost of goods + shipping + fixed payment fee + marketing) ÷ (1 − payment fee % − target margin).

A worked example

A $40 product costs $12 to make, $5 to ship, and payment fees are 1.5% + $0.25, i.e. $0.85. Gross margin: $28, or 70%. Contribution margin: 40 − 12 − 5 − 0.85 = $22.15, or 55.4%. With $8 of marketing per order, net profit is $14.15 per order: a 35.4% net margin.

With 200 orders a month and $300 of fixed costs, the store makes 200 × 14.15 − 300 = $2,530 a month. To reach a 25% net margin with the same costs, the price could go down to $34.35: (12 + 5 + 0.25 + 8) ÷ (1 − 0.015 − 0.25).

Margin or markup: don't mix them up

Markup is calculated on the cost, margin on the selling price. A product bought $20 and sold $40 has a 100% markup but a 50% gross margin. A 50% markup only gives a 33.3% margin. Pricing with a markup while thinking in margin is one of the most common reasons a store makes less money than expected.

How to improve your profit margin

• Raise the average order value with bundles, volume pricing or a free shipping threshold, so shipping and fixed payment fees weigh less on each order.
• Negotiate your cost of goods and packaging as your volumes grow.
• Check your payment fees: a higher Shopify plan lowers card rates, and using a third-party gateway adds transaction fees.
• Lower your marketing cost per order by bringing past customers back: a repeat order costs far less than a new customer.

Frequently asked questions

How do I calculate profit margin on Shopify?

Subtract every cost of an order from its selling price (cost of goods, shipping, payment fees, marketing), then divide the result by the selling price. Shopify can show your gross profit if you enter a cost per item on your products, but not your marketing and fixed costs: this calculator puts them together.

What is a good profit margin for a Shopify store?

There is no single benchmark: margins vary a lot by category, from low-margin electronics to high-margin cosmetics or apparel. What matters is that your net profit per order stays positive after marketing and that your monthly profit covers your fixed costs. Calculate yours, then work on the levers above.

Should I include sales tax or VAT in the selling price?

No. Taxes are passed on to the government: use your price excluding tax to get your real margin.

What is the difference between gross and net profit margin?

Gross margin only subtracts the cost of goods. Net margin subtracts every cost of the order, including shipping, payment fees and marketing. A product can have a high gross margin and still lose money once marketing is paid.