E-commerce and Amazon profit margin calculator
Short answer: A good profit margin is one that still leaves profit after every cost of an order: product and freight, marketplace or payment fees, fulfillment and shipping, advertising, and returns. What counts as good varies a lot by category and business model, so start from your own numbers. The calculator below shows gross margin, contribution margin per order and the most you can spend on ads per order before you lose money.
Calculate your margin
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How this works: gross margin = (price − product cost) ÷ price. Contribution per order = price × (1 − returns %) − product cost − fees − fulfillment − ad spend. Returns are treated as lost revenue with the product not resold, which is conservative. Fixed costs (salaries, software, rent) are not included, so contribution must also cover them.
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Gross margin vs contribution margin
Gross margin only subtracts product cost. Contribution margin also subtracts the variable costs of each order (fees, fulfillment, ads, returns), which is what is left to pay fixed costs and profit. A product can have a healthy gross margin and still lose money per order once fees and ads are included.
Make the numbers trustworthy
The calculator is only as good as your costs. Accurate landed cost, fee and refund data comes from books that record each payout in full; see Amazon seller accounting and e-commerce bookkeeping cost.
Frequently asked questions
What is a good profit margin for e-commerce?
It varies by category and business model. What matters is that contribution per order covers fixed costs and leaves profit; calculate yours from real costs.
What is the difference between gross margin and contribution margin?
Gross margin subtracts only product cost; contribution margin also subtracts fees, fulfillment, ads and returns.
How do I calculate Amazon profit margin?
Subtract product and freight cost, referral and fulfillment fees, ad spend per order and returns from the selling price, then divide by price.
What is break-even ad spend?
The most you can spend on advertising per order before the order stops contributing profit.
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