Question 1

What is the difference between gross margin and net margin?

Accepted Answer

Gross margin measures the profit after subtracting only the direct cost of goods (landed COGS), while net margin accounts for all costs including Shopify fees, payment processing, shipping to customer, ad spend, and returns. Net margin gives you a more accurate picture of your true profitability per unit.

Question 2

How much does Shopify charge in transaction fees?

Accepted Answer

Shopify charges a credit card processing fee on every order: 2.9% + $0.30 on Basic, 2.7% + $0.30 on Shopify, 2.5% + $0.30 on Advanced, and 2.15% + $0.30 on Plus. If you do not use Shopify Payments, an additional third-party transaction fee applies: 2% on Basic, 1% on Shopify, 0.6% on Advanced, and 0.2% on Plus.

Question 3

What is a good profit margin for a Shopify store?

Accepted Answer

A healthy gross margin for ecommerce is typically 50–70%, while a good net margin after all fees and costs is 10–20%. However, this varies by industry — fashion and beauty brands often target higher gross margins (60%+), while electronics may operate on thinner margins (20–30% gross).

Question 4

How do returns affect my profit margin?

Accepted Answer

Returns reduce your effective revenue because you lose the sale and often cannot recoup shipping costs. This calculator estimates the per-unit cost of returns by multiplying your selling price by your return rate percentage, giving you a realistic view of how returns erode margins.

Question 5

Should I use Shopify Payments or a third-party gateway?

Accepted Answer

Using Shopify Payments eliminates the additional third-party transaction fee (2% on Basic down to 0.2% on Plus), which can significantly improve your margins. Unless your third-party processor offers substantially lower card rates, Shopify Payments is usually the more cost-effective choice.

Cost Component	Amount	% of Price
Unit Cost	$0.00	0.0%
Freight / Shipping to You	$0.00	0.0%
Duties & Taxes	$0.00	0.0%
Payment Processing	$0.30	0.0%
Shipping to Customer	$0.00	0.0%
Ad Spend per Unit	$0.00	0.0%
Return Cost (estimated)	$0.00	0.0%
Total Cost per Unit	$0.30	0.0%

Profit Margin Calculator for Shopify

Stop running these numbers by hand.