Ecommerce Profit Margin: How to Calculate It

Profit margin is useful only when the costs inside the calculation match the decision you are making. For product-level planning, contribution margin is often more actionable than company-wide net margin because it isolates the revenue and variable costs associated with a sale.

Core formula

Contribution Margin % = (Retained Revenue − Variable Costs) ÷ Retained Revenue × 100

Costs sellers commonly miss

Marketplace fees, payment processing, fulfillment, seller-paid shipping, packaging, expected returns, affiliate commission and advertising can all reduce the amount retained from an order.

Use margin with break-even

A positive margin does not automatically mean a product has enough room for growth. Compare margin with your break-even price and advertising ceiling before scaling.

Use the numbers

Educational guidance is most useful when paired with your own SKU economics. Run the same assumptions through the calculator, then compare marketplaces if channel selection is part of the decision.

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