Ecommerce Profit Margin Formula Explained

Use these formulas to evaluate your offer economics before scaling ad spend or lowering price.

Net Profit

Net Profit = Selling Price - Product Cost - Shipping Cost - Platform Commission - Ad Cost - Other Costs

Example: 50 - 12 - 6 - 5 - 10 - 2 = 15

Gross Margin = (Net Profit / Selling Price) x 100%

Example: (15 / 50) x 100 = 30.00%

In this calculator, Net Profit Margin uses the same ratio to show how much profit remains from each sale after all listed costs.

Break-even ROAS = Selling Price / Ad Cost (shown only if Ad Cost > 0)

Example: Selling Price 50 and Ad Cost 10 gives ROAS = 5.00x

Formulas keep your pricing strategy objective. If your margin is too thin, small increases in return rate or ad CPM can erase profit quickly.