Cost of Goods Sold & Profitability: Understand your online store's break-even point

Revenue is not the same as profit. You can generate millions in sales and still lose money if your purchase prices are too high compared to your selling prices. Cost of Goods Sold & Profit Margin gives you the big picture: how much are you actually earning on your products—and how does that change over time?

This report automatically calculates your monthly contribution margin based on your actual orders and the purchase prices you’ve entered for your products.

How to Use Cost of Goods Sold & Profit Margin in Shoporama

You’ll find this report under Statistics → Cost of Goods Sold & Profit Margin in the Shoporama admin. Data is calculated automatically every night, so you don’t need to do anything to keep it up to date.

At the top, you’ll see four summary cards:

• Revenue excl. tax — your total sales excluding tax and shipping for the selected period.
• Cost of Goods Sold — what the goods cost you to purchase (units sold × purchase price).
• Profit — revenue minus cost of goods sold. This is your gross profit—that is, what you earn before fixed costs such as salaries, rent, and marketing.
• Profit Margin — profit as a percentage of revenue. The higher it is, the more of every krone in revenue becomes profit.

The table shows the same figures broken down by month, so you can track trends over time. A bar chart provides a visual overview, with revenue and cost of goods sold represented as bars and the contribution margin as a curve.

What is a good contribution margin?

It depends on your industry, but as a rule of thumb for e-commerce:

• Over 40% — you have a healthy business with room for marketing, operations, and profit.
• 20–39% — average. You’re making money, but there’s likely room for improvement.
• Below 20% — warning. Your margins are under pressure, and it may become difficult to cover fixed costs.

The table uses color coding so you can quickly see how each month is performing. Green is good, orange is average, and red requires attention.

Comparison with last year

Below the revenue figure, you’ll see the percentage change compared to the same month last year. For example, +12% compared to last year means you sold 12% more that month than you did a year ago.

Under the profit margin, the change is shown in percentage points (pp). For example, +3.2pp means that your profit margin has increased by 3.2 percentage points compared to the same month last year. A percentage point is the actual difference between two percentages—an increase from 35% to 38.2% is an increase of 3.2 percentage points.

This comparison makes it easy to spot seasonal fluctuations and long-term trends in your business.

Missing Purchase Prices

If you have products without purchase prices, a warning will show how many products are affected and what percentage of revenue they represent. The more products that are missing, the less accurate the picture becomes.

You can click on the warning to view a list of the affected products and go directly to them to enter the purchase price. If you have variants with different purchase prices, you can enter them per variant—the statistics automatically use the variant’s price if it’s entered.

Five things you can do with the numbers

1. Spot fluctuations early. A declining gross margin over several months is a warning sign. Is it due to rising purchase prices? More discounts? A changed product mix? Find the cause before it becomes a problem.
2. Evaluate supplier agreements. If your purchase prices are rising but your selling prices aren’t keeping up, your gross margin will fall. Use the numbers as leverage in negotiations with suppliers.
3. Review your pricing. Combine inventory turnover statistics with ABC analysis to identify products that sell well but have low margins—and vice versa.
4. Plan promotions with a clear head. Discounts lower your contribution margin. That’s fine if you know it in advance and have calculated the cost. Keep an eye on the contribution margin during promotional months.
5. Set goals. Use your historical contribution margin as a baseline, and set a realistic goal for the next 6 months. Follow up monthly.

Combine with ABC analysis

Cost of Goods Sold & Profit gives you the big picture, while ABC analysis drills down to the product level. Use them together:

• View the overall contribution margin in Cost of Goods Sold & Profit — is it satisfactory?
• Open the ABC analysis and select Contribution Margin as the metric—identify the products that have the greatest impact on the contribution margin.
• Compare this with ABC analysis based on Revenue —products that are A in revenue but C in contribution margin are red flags.

Good to know

• The calculation is for reference only. The statistics use the purchase prices currently recorded for your products. If you’ve changed the purchase price since the items were sold, the calculation will reflect the current price, not the historical one. Keep your purchase prices up to date for the most accurate figures.
• Data is updated every night. The statistics are automatically recalculated for the past three months every night, so new orders and changes are captured on an ongoing basis.
• Only paid orders are included. Canceled and unpaid orders are not included in the calculation.
• Credit orders are filtered out. Credit memos (copies of orders with negative amounts) are not included, so returns do not skew the results.

Get Started

Open “Cost of Goods Sold & Profit Margin” and check your gross margin for the past few months. Make sure your purchase prices are entered—the more complete the data, the better the insight.

Use these statistics as a regular checkpoint for your business. A monthly review of your contribution margin takes just a few minutes but gives you a clear picture of whether your business is moving in the right direction.

Read more

• ABC Analysis: Find Out Which Products Are Making You Money
• Contribution Margin — Glossary
• Pareto Principle (80/20 Rule) — Glossary