Margin and profit · P&L line 20
Gross margin
Revenue minus cost of goods, as a percentage.
Formula
(Net revenue − COGS) ÷ net revenue
Gross margin is the share of revenue left after the cost of goods: revenue minus COGS, divided by revenue. It is the most quoted margin in retail and the least sufficient one in ecommerce, because it stops before shipping, payment fees and advertising have taken anything.
A store at 60 percent gross margin can still be losing money on every order once fulfilment and acquisition are counted, which is exactly why the contribution-margin ladder exists. Gross margin corresponds roughly to CM1 percent, and only when the cost data behind it is complete and dated properly.
The accounting version carries a second ambiguity ecommerce inherits badly: whether the denominator includes VAT. A margin computed on VAT-inclusive revenue is flattered by the whole VAT rate, and two stores comparing 'gross margin' across that line are not comparing anything.
Use it as a product-level sanity check and steer on CM2 and CM3. The contribution margin calculator shows how far apart the two readings sit on your own numbers.