Profit margin
Profit margin is the percentage of the selling price you keep after costs, calculated as profit ÷ revenue × 100, with gross and net versions depending on which costs you subtract.
Gross margin subtracts the cost of the product itself. Net margin also subtracts everything it takes to sell it: marketplace referral and fulfilment fees, shipping, advertising, returns, and overheads. A product can look healthy on gross margin and lose money on net, which is the most common way new sellers fool themselves.
Margin norms differ by model. FBA products carry Amazon's fees but command Prime pricing; dropshipping skips inventory risk but pays for every customer through ads, so ad spend per order is usually the number that decides whether a dropshipped product's margin survives.
Why it matters
Margin is the number that decides whether volume is worth having, and calculating it with every real cost included is the single most protective habit in product research.
Related terms
See Profit margin on real products
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