FAQ & key takeaways
How to read this metric
What it measures
Gross Margin is the percentage of total revenue that remains after subtracting the direct costs of producing or acquiring the goods sold (COGS). It represents the funds available to cover operating expenses and profit.
Why it matters
Gross Margin is a fundamental measure of your business’s financial health. It shows how efficiently you are producing or sourcing your products and how much “buffer” you have to pay for marketing, salaries, and other overhead.
How to increase gross margin
- Optimize Supply Chain: Streamline procurement and logistics to reduce COGS.
- Raise Prices: If your brand and product value allow, increasing prices is the most direct way to boost margin.
- High-Margin Product Mix: Focus your marketing efforts on the products in your catalog with the highest margins.
- Reduce Waste: Minimize inventory loss, returns, and damaged goods to preserve margin.