When talking about improving profitability, managing and increasing Gross Margins is key in order to achieve the financial success of your brand. By calculating your gross margins, you can quickly assess whether your brand is turning a profit, scraping by, or just burning cash.
Definitions
Gross margins measure the profit you make after subtracting the cost of goods sold (COGS) but before deducting all other expenses (like warehouse or shipping costs). In eCommerce, gross margins between 50-70% are considered “good.”
Gross Margin = (Net Revenue - COGS) / Net Revenue x 100
with:
| Net Revenue | Net Revenue from all orders at this time calculated as Gross Revenue after Product Returns. |
| COGS | All the costs involved with getting an item into your inventory and prepared for sale. |
Your gross margin and net revenues are shown as a color-coded combined chart followed by absolute figures:
With the activation of RX Forecast™ you will additionally receive three forecast scenarios for the coming months. To enable predictions, simply book the add-on Forecast Plus.
Use Cases
The gross margin is a popular and helpful ratio for assessing a company’s financial health and profitability since it shows the percentage of your Net Revenue that you actually keep as available income. In general, gross margin can provide great insights into different aspects of your company’s financial performance:
- The profitability and stability of your business
- Your ability to manage expenses
- Your pricing strategy
- Your potential raising funds
Not using RetentionX yet?
Comments
0 comments
Please sign in to leave a comment.