Hello Shopify Users!
2 Questions:
Regarding the Shopify profit margin calculator, does the margin percentile shown reflect the gross profit margin or the net profit margin?
Regarding profit margins, what is an acceptable profit margin for e-commerce businesses and is there a chart that is provided by Shopify to show acceptable profit margins by industry?
Thank you in advance!
Hi @TCA50 - the BeProfit - Profit Tracker app could be what you’re looking for. You’ll get a dashboard that lets you track and analyze your profits (gross profit and net profit) as well as all of your store’s expenses including production, shipping, marketing costs, and more.
The dashboard lets you easily make sense of your data at a quick glance so you can discover what areas need optimizing in order to maximize your store’s profit. Plus the app is free, so I truly believe you’ll find that it brings a great deal of value to your store.
Full disclosure, I’m on the BeProfit team, so if you have any questions about the app please feel free to ask me - I’m happy to help.
Try the app here: https://apps.shopify.com/beprofit-profit-tracker
Hello Ofer_BeProfit!
Thank you for reaching out and for the information on the app you provided. My apologies for the delay in responding; will definitely take a look at the app and its functionality. Based on the reviews I’ve read, it appears to be very beneficial as well as user-friendly to those who are currently on the platform. I will keep you posted and follow up with any questions. Stay well and be safe.
Best regards!
TCA50
Argh.. acceptable profit margins: a very understandable question.
It depends very much on your industry and the extend to which you stand out/have competition.
On luxury goods profits can be 50-100% percent.
On random low priced items profits can be 0-10%.
Even negative profits could be acceptable to acquire customers for the long term.
Also check out this table.
I would start researching your industry specifically. Or, if you are trying to figure what industry to enter.. pick a niche where you don’t have to compete on price.
If you’d like see profit margins on your products with and without VAT, you can install the Draft Profit Margins app and toggle VAT.
Hello @TCA50 ,
We are OneCommerce - an eCommerce Solution Platform.
For your question:
The profit margin percentile shown in the Shopify profit margin calculator reflects the gross profit margin, not the net profit margin.
The acceptable profit margin for e-commerce businesses can vary depending on the industry, business model, and other factors such as competition, overhead expenses, and pricing strategy. Therefore, there is no universal standard for what is considered an acceptable profit margin.
However, a good benchmark for e-commerce businesses is to aim for a gross profit margin of 40% or higher. This means that for every dollar of revenue generated, the business is keeping 40 cents or more after accounting for the cost of goods sold. A higher gross profit margin indicates that the business is generating more profit per sale, which can be reinvested into the business or distributed as profit to owners or shareholders.
It’s worth noting that net profit margins can be lower than gross profit margins, as they take into account all the indirect costs and expenses associated with running a business. Generally, net profit margins of around 10-20% are considered acceptable for e-commerce businesses.
We also have an app called TrueProfit that can help you track your profit in real-time. Hit us up if you want to know more.
Hope these can help. Please hit the Like Button or mark this as Accepted Solution for us, it encourage us a lot.
Regards,
OneCommerce team.