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Shopify Profit Margin Calculator

Work out what one Shopify order really leaves you: gross margin after product cost, contribution margin after shipping, payment fees, ads and refunds, and net margin once your fixed monthly costs are covered.

What is a Shopify profit margin?

A Shopify profit margin is the share of an order's selling price you keep as profit. Gross margin subtracts only product cost (COGS). Contribution margin also subtracts shipping, Shopify payment fees, ad spend and refunds. Net margin then subtracts a share of fixed costs such as your Shopify plan and apps.

One order, every cost

Enter the numbers for a single order. The fee fields start at MerchantFlow's default rates (2.9% + 0.30 card processing, and a 2% transaction fee when you use a third-party gateway). Shopify's rates depend on your plan and country, so change them to match your own.

Price and product cost

What the customer pays for the product, and what it costs you to buy or make.

Shipping

Postage and packaging per order, minus anything the customer pays you for shipping.

Payment fees

Your card processing rate. Turn on the third-party gateway switch if you take payment through a provider other than Shopify Payments.

Optional

Add ad spend and refunds for contribution margin, and fixed monthly costs with an order count for net margin.

The formula

How Shopify profit margin is calculated

Gross margin = (Price - COGS) / Price; Contribution margin = (Price - COGS - Shipping - Payment fees - Ad spend - Refunds) / Price; Net margin = (Contribution profit - Fixed costs per order) / Price

Each margin starts from the same selling price and takes off one more layer of cost. Multiply any of them by the price to get the profit per order in money.

Price
What the customer pays for the product on one order.
COGS
Product cost: what it costs you to buy or make the goods in the order.
Shipping
Postage and packaging for the order, minus any shipping the customer pays you.
Payment fees
Price x processing rate + fixed fee, plus Shopify's transaction fee (Price x rate) when you use a third-party gateway.
Ad spend
Advertising cost per order: ad spend for a period divided by the orders in that period.
Refunds
Price x refund rate. The expected revenue given back per order.
Fixed costs per order
Fixed monthly costs (Shopify plan, apps, staff, rent) divided by orders per month.
Markup
(Price - COGS) / COGS. The same profit as gross margin, divided by cost instead of price.
  • Payment fees are calculated on the selling price only. Fees on shipping the customer pays you are not included: to count them, add the shipping charged times your processing rate to the shipping cost you enter.
  • Refunds count the price going back to the customer while every cost is already spent. Return shipping and restocking labor are not included and add to the cost; returns you can resell reduce it.
  • The default fee rates (2.9% + 0.30 processing, and a 2% third-party transaction fee) are MerchantFlow's defaults, not your rates. Shopify's rates vary by plan and country, so check yours in your Shopify admin.

Worked examples

Three Shopify orders, worked through

Each example runs through the same steps as the calculator above. Amounts are in your store currency, and the fees use the calculator's default rates.

Example 1

A 40 product on Shopify Payments

A product sells for 40.00, costs 14.00 to make and 6.00 to ship. The store uses Shopify Payments, spends 8.50 on ads per order and refunds 3% of orders.

Inputs

Selling price
40.00
Product cost (COGS)
14.00
Shipping
6.00
Processing
2.9% + 0.30
Ad spend per order
8.50
Refund rate
3%

Working

  1. Gross profit: 40.00 - 14.00 = 26.00, a 65.0% gross margin (185.7% markup)
  2. Payment processing: 40.00 x 2.9% + 0.30 = 1.46
  3. Expected refunds: 40.00 x 3% = 1.20
  4. Left for advertising: 26.00 - 6.00 - 1.46 - 1.20 = 17.34
  5. Contribution profit: 17.34 - 8.50 = 8.84, which is 8.84 / 40.00 = 22.1% of the price

Contribution margin

22.1% (8.84 per order)

A 65% gross margin becomes 22.1% once shipping, fees, refunds and ads come off. The gross figure is the one you see next to the product; the contribution figure is the one that pays your bills.

Example 2

A 60 product through a third-party gateway

A product sells for 60.00, costs 18.00 and 7.00 to ship. The store takes payment through a third-party gateway charging 2.9% + 0.30, so Shopify's 2% transaction fee applies too. Ads cost 15.00 per order and 5% of orders are refunded.

Inputs

Selling price
60.00
Product cost (COGS)
18.00
Shipping
7.00
Gateway processing
2.9% + 0.30
Shopify transaction fee
2%
Ad spend per order
15.00
Refund rate
5%

Working

  1. Gross profit: 60.00 - 18.00 = 42.00, a 70.0% gross margin (233.3% markup)
  2. Gateway processing: 60.00 x 2.9% + 0.30 = 2.04
  3. Shopify transaction fee: 60.00 x 2% = 1.20, so fees total 3.24
  4. Expected refunds: 60.00 x 5% = 3.00
  5. Left for advertising: 42.00 - 7.00 - 3.24 - 3.00 = 28.76
  6. Contribution profit: 28.76 - 15.00 = 13.76, which is 22.9% of the price

Contribution margin

22.9% (13.76 per order)

The third-party transaction fee costs 1.20 on this order, two points of margin, on top of what the gateway itself takes. At the same processing rate without it, the order would keep 14.96.

Example 3

Adding fixed costs to get net margin

A product sells for 30.00, costs 10.00 and 5.00 to ship, on Shopify Payments. Ads cost 7.00 per order and 2% of orders are refunded. The store pays 2,000 a month for its Shopify plan, apps and other overheads, and takes 800 orders a month.

Inputs

Selling price
30.00
Product cost (COGS)
10.00
Shipping
5.00
Processing
2.9% + 0.30
Ad spend per order
7.00
Refund rate
2%
Fixed monthly costs
2,000
Orders per month
800

Working

  1. Gross profit: 30.00 - 10.00 = 20.00, a 66.7% gross margin (200.0% markup)
  2. Payment processing: 30.00 x 2.9% + 0.30 = 1.17; expected refunds: 30.00 x 2% = 0.60
  3. Contribution profit: 20.00 - 5.00 - 1.17 - 0.60 - 7.00 = 6.23, a 20.8% contribution margin
  4. Fixed costs per order: 2,000 / 800 = 2.50
  5. Net profit: 6.23 - 2.50 = 3.73 per order, 12.4% of the price, or 3.73 x 800 = 2,984 a month

Net margin

12.4% (3.73 per order)

Fixed costs do not change with each order, so net margin moves with volume. The same 2,000 spread over 400 orders would cost 5.00 each and leave 1.23 per order.

The guide

Margin, markup and the fees Shopify takes

Profit margin vs markup

Margin and markup use the same profit and divide it by different numbers. Margin divides by the selling price: a product that sells for 40 and costs 14 leaves 26, a 65% margin. Markup divides by the cost: the same 26 over 14 is a 185.7% markup.

That is why markup is always the bigger number, and why mixing them up is expensive. A merchant who wants a 50% margin and adds a 50% markup to a 20 product sells it at 30, which is only a 33.3% margin. A 50% margin needs a 100% markup.

Margin is the one to plan with, because every cost that comes off an order (fees, shipping, ads, refunds) is naturally a share of the price, not a share of the product cost.

Which Shopify fees come off each order

Some Shopify costs are charged per order and belong in your margin on every sale. Others are charged per month and belong in net margin, spread across your orders.

Payment processing

A percentage of the order plus a fixed amount per transaction, charged by Shopify Payments or by whichever gateway you use. The fixed part weighs more on cheap orders: 0.30 is 3% of a 10 order but 0.3% of a 100 order.

Third-party transaction fee

If you take payment through a provider other than Shopify Payments, Shopify adds its own transaction fee on each order, on top of what that provider charges. The rate falls as your Shopify plan goes up.

Currency conversion

Selling in currencies other than your payout currency adds a conversion cost on those orders. Leave it out of this calculator if you sell in one currency, or fold it into the processing rate if you do not.

Your Shopify plan and apps

The monthly subscription and paid apps do not change with each order. They are fixed costs: enter them under fixed monthly costs, with your order count, and they come off net margin rather than contribution margin.

Your own rates are listed in your Shopify admin payment settings. Use those rather than the defaults for a figure you can rely on.

In MerchantFlow

This calculation, on every order you sync

MerchantFlow connects to your Shopify store and ad accounts and works out profit on each order: product cost from your COGS, payment fees, shipping and fulfilment, and ad spend from Meta, Google, TikTok and Snapchat, with refunds netted out. Your P&L then takes off your fixed costs for net profit.

See the real-time P&L

Common Questions

Shopify profit margin: FAQ

What is a good profit margin for a Shopify store?

There is no single good number, and a benchmark from another store tells you little. Margins depend on your category, your price point, what fulfilment costs you and how you win customers: a store that sells mostly through paid ads needs far more gross margin than one that sells to repeat customers through email. The useful tests are your own: contribution margin must be positive after ad spend, and contribution profit across the month must cover your fixed costs with room to spare.

What is the difference between gross margin and net margin?

Gross margin is the selling price minus product cost, as a share of the price. It says whether a product is priced sensibly. Net margin is what is left after every cost: shipping, payment fees, ad spend, refunds and your fixed costs such as your Shopify plan, apps and staff. It says whether the business makes money. This calculator also shows contribution margin in between: everything that changes with each order, before fixed costs.

How do Shopify fees affect my profit margin?

Card processing takes a percentage of every order plus a fixed fee per transaction, and the fixed part hurts low-priced products most. If you use a third-party payment gateway, Shopify adds a transaction fee on top of that gateway's own charges. Your Shopify plan and apps are fixed monthly costs, so they reduce net margin rather than the margin on each order. Enter your own rates from your Shopify admin to see the exact effect.

Why should ad spend be included in profit margin?

Because for most Shopify stores advertising is what produces the order, so it is a cost of that order just like shipping. A product with a healthy gross margin can still lose money on every sale once the ad cost per order is taken off. Leaving ads out makes every product look profitable. The break-even line in the results shows the most you can spend on ads per order before the sale stops paying for itself.

Is profit margin the same as markup?

No. Both use the same profit, but margin divides it by the selling price and markup divides it by the product cost. A product that costs 14 and sells for 40 has a 65% margin and a 185.7% markup. Use margin when you plan, because your other costs are shares of the price.

How are refunds counted?

A refunded order gives the selling price back while the product, shipping, fees and ad spend are already spent, so each order carries the refund rate times the price. Return shipping and the labor to restock a return are not included and make a refund cost more, while stock you can resell makes it cost less. The Refund True Cost Calculator adds those costs for your own returns.

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