Gross Margin
Gross margin is revenue minus COGS, expressed as a percentage of revenue. It measures how much of each sales dollar survives the cost of the product itself, before fees, shipping, ads and overhead. For ecommerce the honest version requires landed-cost COGS on an accrual basis; computed any other way, the number is decoration. Healthy DTC brands typically run 55-70%; wholesale-sourced marketplace sellers often run 35-50%.
Gross margin is the ceiling on everything below it. A brand at 60% gross has room for fees, shipping and a real ad budget and can still net 15%. A brand at 35% gross has almost no room; every downstream cost fights over a thin slice, and the business only works with cheap logistics and organic demand.
The trap is measurement error, not the metric. Book Amazon deposits as revenue and margin looks worse than it is; leave freight and tariffs out of COGS and it looks better than it is. We regularly meet sellers convinced they run 58% who actually run 44% once landed costs are in. That 14-point gap changes what the ad budget should be, which SKUs deserve reorders, and what the business is worth. The fix is mechanical: correct COGS, covered in our COGS guide, inside proper monthly books.
Where this shows up in our work
This isn’t textbook material for us; it’s the day-to-day of keeping seller books right. See how we handle it in practice:
Monthly Ecommerce Bookkeeping→