Shopify gross profit is the money your store keeps after subtracting the variable cost from your total sales revenue. If your store generates $10,000 in sales and your products cost $4,000, your Shopify gross profit is $6,000. Tracking this metric gives you a clearer picture of your store's financial performance and helps you make informed decisions about product pricing, costs, and profitability.

Running a successful Shopify store isn't just about generating revenue, it's about turning that revenue into sustainable profit. While high sales figures may indicate business growth, they don't always reveal how much money your store actually earns after covering product costs.

Whether you're a new Shopify entrepreneur or an experienced ecommerce business owner, understanding how to calculate gross profit is essential for building a financially sustainable store. In this guide, you'll learn what Shopify gross profit is, how to calculate it using proven methods, and the key differences between gross profit and net profit.

Key takeaways

• Formula: Shopify gross profit = Total Revenue − Cost of Goods Sold (COGS).

• Margin: Gross Profit Margin (%) = (Gross Profit ÷ Total Revenue) × 100.

• For a more accurate view: Include outbound shipping and payment fees in gross profit. 

• Benchmark bands: below 30% is lower margin, 30% to 50% is moderate, above 50% is higher. These are illustrative, not universal.

• Where to track it: Shopify admin, Analytics > Reports, filtered by Profit margin.

What is Shopify gross profit?

Shopify gross profit is the amount of money your business earns from selling products after subtracting the cost of goods sold (COGS) from total revenue. It helps you understand how much money remains from your sales before accounting for other business operating expenses.

COGS generally includes direct costs associated with the products you sell, such as product purchasing or manufacturing costs and applicable direct labor expenses.

Gross profit does not typically account for operating expenses such as store rent, marketing, administrative expenses, or other general business overheads. Understanding this distinction helps Shopify store owners evaluate product profitability and make better pricing decisions.

How do you calculate Shopify gross profit?

Calculating gross profit is straightforward. First, determine your total sales revenue. Next, identify the cost of goods sold (COGS) during the same period. Finally, subtract COGS from your total revenue to find your gross profit.

Gross Profit Formula:

Gross Profit = Net Revenue − Cost of Goods Sold (COGS)

Example

Suppose your Shopify store generates $10,000 in sales revenue during a month, and the total cost of the products sold is $4,000.

Using the gross profit formula:

• Gross Profit = $10,000 − $4,000

• Gross Profit = $6,000

This means your Shopify store has generated $6,000 in gross profit before deducting operating expenses and other costs. By using this formula, you can easily calculate your store's gross profit and better understand how profitable your products are.

What is gross profit margin?

Gross profit margin is one of the key financial metrics used to measure your Shopify store's profitability. It is closely related to gross profit, but there is one important difference: gross profit is measured in value, whereas gross profit margin is expressed as a percentage.

Gross profit margin represents the percentage of sales revenue remaining after subtracting the cost of goods sold (COGS). It helps you understand how efficiently your store generates profit from product sales and how much revenue remains to cover operating expenses and contribute toward net profit.

How do you calculate gross profit margin?

Calculating gross profit margin is simple. First, determine your total sales revenue and cost of goods sold (COGS). Then, calculate your gross profit by subtracting COGS from total revenue. Finally, divide your gross profit by total revenue and multiply the result by 100 to get your gross profit margin percentage.

Gross Profit Margin Formula:

Gross Profit Margin (%) = (Gross Profit ÷ Total Revenue) × 100

Example

Suppose your Shopify store generates $10,000 in sales revenue and has a cost of goods sold of $4,000.

• Gross Profit = $10,000 − $4,000 = $6,000

• Gross Profit Margin = ($6,000 ÷ $10,000) × 100

• Gross Profit Margin = 60%

This means your store generates a gross profit margin of 60%, leaving $0.60 from every dollar of revenue after covering the cost of goods sold.

What is a more accurate way to calculate Shopify gross profit?

Calculating gross profit accurately is essential for understanding your Shopify store's financial performance. However, relying only on basic gross profit figures may not give you the complete picture of your business profitability, especially when you have additional expenses such as shipping and payment processing fees.

One important thing to understand is that not all business expenses belong in the gross profit calculation. For example, product costs and applicable inbound shipping expenses are generally included in the cost of goods sold (COGS), whereas outbound shipping and payment processing fees are typically treated as variable Costs.

Discounts and returns should also be accounted for when determining net sales revenue. If your revenue figure already reflects these deductions, you should not subtract them again.

Standard Gross Profit Calculation:

• Net Sales = Gross Sales − Discounts − Returns

• Gross Profit = Net Sales − Cost of Goods Sold (COGS)

Example

Suppose your Shopify store generates the following figures:

• Gross sales: $12,000

• Discounts: $500

• Returns: $500

• Cost of goods sold: $4,000

Calculation:

• Net Sales = $12,000 − $500 − $500 = $11,000

• Gross Profit = $11,000 − $4,000 = $7,000

Calculating for better profitability insights

Although gross profit helps you understand product profitability, it doesn't account for every variable expense associated with fulfilling and processing customer orders. To get a clearer picture of the money your store generates after these additional costs, you can calculate gross profit like this.

For example,

• Outbound shipping costs: $500

• Payment processing fees: $300

Calculation:

• Gross Profit = Net Sales − Variable Costs

• Gross Profit = $7,000 − $500 − $300 = $6,200

Tracking gross profit like this helps you understand product profitability and the additional costs involved in fulfilling sales. Without accounting for these expenses, you may overestimate how much revenue is available to cover your fixed operating costs and generate profit. Accurate financial calculations help you make better decisions about product pricing, shipping strategies, marketing expenses, and overall business growth.

What is a good gross profit margin for a Shopify store?

A good gross profit margin for a Shopify store depends on several factors, including the type of products you sell, product costs, pricing strategy, and business model. While there is no universal gross profit margin that works for every ecommerce business, the following ranges can serve as general illustrative guidelines.

Gross profit margin benchmarks

• Below 30% (Lower margin): A lower gross profit margin leaves less room to cover operating expenses, shipping, marketing, and other business costs. Stores in this range may need to pay close attention to product pricing and cost management.

• 30% to 50% (Moderate margin): This range can provide a reasonable balance between product costs and available gross profit for many types of ecommerce businesses. However, profitability still depends on operating expenses and customer acquisition costs.

• Above 50% (Higher margin): A higher gross profit margin provides more room to cover operating expenses, invest in marketing, and support business growth. However, higher margins do not automatically guarantee higher net profits.

Important: These percentages are illustrative estimates, not universal industry benchmarks. A healthy gross profit margin varies depending on your product category, sourcing costs, pricing strategy, fulfillment expenses, and overall business model.

Every Shopify store has unique financial requirements and cost structures. Instead of comparing your margin with a fixed percentage, evaluate whether your gross profit is sufficient to cover your business expenses and support sustainable growth. You should also track contribution margin and net profit to understand how much your store actually earns after accounting for additional business expenses.

How to improve gross profit for your Shopify store?

There are several ways to improve gross profit and strengthen your Shopify store's profitability. By managing product costs, optimizing pricing strategies, controlling shipping expenses, and reducing product returns, you can improve your store's financial performance.

1. Reduce your cost of goods sold (COGS)

One of the most effective ways to improve gross profit is to reduce your cost of goods sold. Start by negotiating better prices with your suppliers, purchasing inventory strategically, and exploring alternative suppliers who offer competitive pricing without compromising product quality. Reducing your product purchasing and manufacturing costs allows you to retain more gross profit from every sale.

2. Optimize your product pricing

Increasing your product prices can help improve gross profit, provided customers continue purchasing at the new prices. Consider testing a 3% to 7% price increase on selected best-selling or high-demand products. Monitor sales volume, conversion rates, and customer feedback to understand how customers respond. Avoid increasing prices without evaluating competitor pricing, customer expectations, and product demand.

3. Optimize shipping and fulfillment costs

Shipping expenses can significantly affect your ecommerce profitability. Compare different shipping providers, negotiate better shipping rates, and optimize your packaging to reduce unnecessary costs. You can also introduce strategic shipping options, such as minimum-order thresholds for free shipping or discounted shipping for larger orders. Remember that inbound shipping costs may affect COGS, while outbound shipping expenses generally affect contribution margin rather than gross profit.

4. Reduce product returns and refunds

Product returns and refunds can negatively affect your store's profitability by reducing net sales revenue and potentially creating additional shipping and inventory costs. To minimize avoidable returns, invest in detailed product descriptions, interactive size charts, high-quality product images, demonstration videos, and clear product specifications. You should also implement quality control procedures to identify defective products before they reach customers. Reducing unnecessary returns helps protect your revenue, minimize additional fulfillment expenses, and improve your overall business profitability.

How to track gross profit for your Shopify store?

You can track your Shopify store's gross profit using the built-in reports available in your Shopify admin. These reports help you understand how much profit your products generate and identify which products, variants, and orders contribute most to your store's profitability.

Use Shopify's built-in gross profit reports

Shopify provides several profit reports that help you analyze your store's financial performance. Here are some useful reports:

• Gross Profit by Product Variant: Shows the gross profit generated by individual product variants, such as different sizes, colors, or styles.

• Gross Profit by Product: Helps you identify how much gross profit each product generates during a selected period.

• Gross Profit by Order: Allows you to analyze gross profit at the individual order level.

• Gross Profit Breakdown: Provides a detailed breakdown of gross profit-related figures.

To access these reports, navigate to Analytics > Reports in your Shopify admin and filter the reports by the Profit Margin category.

Before relying on Shopify's profit reports, make sure you've entered the correct Cost per item for your products. If your products have multiple variants, enter the cost for each variant separately. Shopify uses this information to calculate product costs, gross profit, and gross profit margin. Without accurate product cost information, your profit reports may not reflect your store's actual product profitability.

Although Shopify's built-in reports provide useful information about product and order profitability, you may need additional financial insights to understand your store's overall performance. A dedicated profit analytics app such as Bloom may offer additional profitability tracking features.

Conclusion

Gross profit is one of the first metrics you should understand when evaluating your Shopify store's profitability. Without accurately tracking gross profit, it becomes harder to understand your store's overall financial performance.

However, gross profit alone doesn't provide a complete picture of your business profitability. You should also account for additional variable expenses, such as outbound shipping and payment processing fees, to calculate your contribution margin.

If you want more detailed profitability insights, consider using Bloom that tracks additional expenses and metrics such as contribution margin and net profit.

Ultimately, understanding these financial metrics will help you identify profitable products, manage expenses, make smarter pricing decisions, and build a more sustainable Shopify business.