Your gross profit margin shows what percentage of your product sales revenue remains after you subtract the cost of the products sold. In CommentSold, you can review and adjust product margins and use reporting to analyze gross margin across a selected date range or by collection.
Use the table of contents below to navigate to specific sections of this article:
- What Is Gross Profit Margin
- Why Does Gross Profit Margin Matter
- Gross Profit Margin Benchmarks
- View Your Margins on Products
- View Your Gross Profit Margin via Reporting
- FAQs
What Is Gross Profit Margin?
Gross profit margin measures the percentage of revenue remaining after product costs are deducted. It helps you understand how much revenue your products generate relative to what you paid for them.
Use this formula:
Gross Profit Margin = ((Total Revenue − Total Product Costs) ÷ Total Revenue) × 100
Gross profit margin is expressed as a percentage. This makes it easier to compare products with different costs and selling prices.
What Is the Difference Between Gross Profit and Gross Profit Margin?
- Gross profit is the amount left after subtracting product costs from revenue.
- Gross profit margin is that amount expressed as a percentage of revenue.
For example, suppose you buy a hat for $5 and sell it for $10.
- Gross profit: $10 − $5 = $5
- Gross profit margin: ($5 ÷ $10) × 100 = 50%
Now suppose you buy a pair of shoes for $25 and sell them for $50.
- Gross profit: $50 − $25 = $25
- Gross profit margin: ($25 ÷ $50) × 100 = 50%
Although the shoes generate more gross profit in dollars, both products have the same gross profit margin.
Why Does Gross Profit Margin Matter?
Understanding your gross profit margin can help you make informed decisions about product pricing and purchasing.
You can use gross margin to:
- Evaluate product profitability: Understand how much revenue remains after product costs.
- Monitor performance: Compare your margins with your business targets over time.
- Compare products and collections: Identify products, brands, or collections that generate margins aligned with your goals.
- Inform purchasing decisions: Use historical product performance to help guide future buying decisions.
- Review pricing strategies: Evaluate how changing a product’s price may affect its margin.
Gross Profit Margin Benchmarks
It’s important for retailers to familiarize themselves with margin benchmarks so they know where their own margins fall. This allows retailers to know if they’re on track, excelling, or if they need to improve.
Below are our recommended benchmarks for retailers’ gross profit margin.
| Average | Good | Excellent |
| 46-52% | 53-59% | 60%+ |
View Your Margins on Products
With CommentSold, retailers can view and adjust the margins for individual products. This gives retailers the flexibility to make pricing changes (e.g., offer products at a sale price to move inventory) while still being mindful of their margins.
Adjusting the price and margins on the individual products you sell is the most direct way to impact your gross profit margin as that gross profit margin figure will compare the total revenue generated from these products to the total cost of the products sold.
When you add a new product in CommentSold, you enter the Cost and Retail Price. CommentSold automatically calculates the Margin and Profit based on the information you enter.
- Select Products in the side menu of your CommentSold dashboard.
- Select Add Product in the top-right corner of the page.
- Enter the price you paid the vendor for the product in the Cost field.
- Enter the price you will sell the product for in the Retail Price field.
- Review the Margin and Profit figures calculated by CommentSold.
- Adjust the Retail Price, if necessary.
You can view and adjust the Cost, Retail Price, and Sales Price for an existing product on the Edit Inventory page of a product’s record. CommentSold automatically calculates the Margin and Profit based on the information you enter.
If you enter a Sale Price, CommentSold will calculate the Margin and Profit using that price.
- Select Products in the side menu of your CommentSold dashboard.
- Select the SKU for the product you wish to view or adjust.
- Select Edit Inventory at the top of the product record.
- If necessary, adjust the Cost of the product (i.e., the cost has increased).
- If necessary, adjust the Retail Price for the product.
- If necessary, enter a Sale Price for the product.
- Review the Margin and Profit figures calculated by CommentSold.
- Adjust the Retail Price or Sale Price, if necessary.
View Your Gross Profit Margin via Reporting
Your Main Reporting Overview allows you to view your gross profit margin across a date range you define (e.g., a week, a month, quarter, year-to-date, etc.). You can even view a breakdown of your gross profit margin by collection.
- Select Reporting in the side menu of your CommentSold dashboard.
- Select All from the report options listed at the top of the page.
- Define your Start Date and End Date in the fields provided, then select the Retrieve button.
- Scroll down to the Orders section.
- Locate and view your Gross Margin.
- Select View by Collection if you wish to see a breakdown of each collection’s margin.
FAQs
How do I calculate gross profit margin?
Subtract total product costs from total revenue, divide the result by total revenue, and multiply by 100.
Formula: ((Total Revenue − Total Product Costs) ÷ Total Revenue) × 100.
Is gross profit margin the same as gross profit?
No. Gross profit is the dollar amount remaining after product costs are deducted from revenue. Gross profit margin expresses that amount as a percentage of revenue.
Why should I review margins at the product level?
Reviewing individual product margins helps you compare products with different costs and selling prices. You can use this information when adjusting prices or planning future purchases.
Can I adjust a product’s price in CommentSold?
Yes. When adding a product, enter its Cost and Retail Price, then review the calculated Margin and Profit. You can adjust the Retail Price if needed. CommentSold also supports viewing and adjusting margins for existing products.
Where can I view gross profit margin by collection?
Go to Reporting > All, set your Start Date and End Date, and select Retrieve. In the Orders section, locate Gross Margin and select View by Collection.
Are CommentSold’s gross margin benchmarks guaranteed targets?
No. The benchmarks are recommendations provided as reference points. Consider your business model, product costs, and pricing strategy when setting your own targets.