What is Gross Margin?

Gross Margin is the percentage of revenue left after deducting the Cost of Goods Sold (COGS). It represents how much of each revenue dollar is available to cover operating expenses and generate profit.

Why It Matters

Gross margin determines how much room you have for everything else — marketing, operations, team, and profit. Brands with higher gross margins can afford to spend more on acquisition and still remain profitable.

How to Calculate It

Gross Margin = ((Revenue − COGS) ÷ Revenue) × 100

If you sell a product for $100 and it costs $35 to manufacture:

Gross Margin = (($100 − $35) ÷ $100) × 100 = 65%

DTC Benchmarks

Beauty & Skincare: 70-85%
Food & Beverage: 40-65%
Fashion & Apparel: 55-70%
Supplements: 70-80%
Home Goods: 50-65%

Gross Margin vs. Contribution Margin

Gross margin only subtracts COGS. Contribution margin goes further by also subtracting shipping, transaction fees, and other variable costs. For DTC brands, contribution margin is the more actionable metric.