What is gross profit?

Revenue minus the cost of goods sold — what's left before operating expenses.

How is gross profit different from revenue?

Revenue is total sales; gross profit subtracts what the products cost you.

How do I track gross profit on Shopify?

Record COGS per product and use Shopify or an accounting app to compute gross profit.

Why does gross profit matter for ads?

Your margin sets the ceiling for what you can spend to acquire a customer profitably.

What's a good gross profit margin?

It varies by industry, but most healthy product businesses target 40%+ gross margin.

Glossary Term

G

Gross Profit

Revenue minus the cost of goods sold — what's left to cover expenses and become profit.

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Key Takeaways
Gross Profit is revenue minus the cost of goods sold (COGS).
It's the top line of profitability, before operating expenses.
It tells you a product is making money, not just selling.
High revenue with thin margin can lose money after ad spend.
It pairs with AOV and conversion to tell the full profit story.

Overview

Gross Profit is revenue minus the cost of goods sold (COGS) — the amount left after you account for what each product cost to make or buy. It's the top line of profitability, before operating expenses like marketing, rent, and salaries.

On Shopify, gross profit is what you track to know a product is actually making money, not just selling. A high-revenue product with a thin margin can lose money after ad spend; a lower-revenue product with a healthy margin can be your most profitable. It's a core metric in your data analytics.

Gross profit pairs with AOV and conversion rate to tell the full story. Lifting AOV and margin grows gross profit per order; lifting conversion grows the number of orders. Both matter, but margin is the one merchants most often overlook.

1

Why Gross Profit Matters for Shopify Merchants

1
True Product Profitability
Revenue alone doesn't tell you a product is profitable — gross profit does.
2
Pricing Decisions
Know your margin before discounting so sales don't turn into losses.
3
Ad Spend Guidance
Your margin sets the ceiling for what you can spend to acquire a customer.
4
Product Mix
Identify high-margin products to feature and low-margin ones to rethink.
5
Growth That Pays
Growing revenue without margin grows costs faster than profit.

2

Tracking and Improving Gross Profit

1
Track COGS
Record the cost of each product so Shopify or your accounting tool can compute gross profit.
2
Watch margin by product
Some products earn most of your profit; identify and protect them.
3
Lift AOV
Bundles and upsells increase revenue per order without raising COGS proportionally.
4
Negotiate COGS
Lower supplier costs as volume grows to widen margin directly.
5
Discount from margin
Set discount limits based on margin so promotions stay profitable.