Understand your eCommerce Gross Margin with Seller Ledger
Seller Ledger is very pleased to announce the release of new functionality to help you track the gross margin in your eCommerce business.
What is Gross Margin and why is it important?
Gross margin, to put it simply, is how much profit you make on top the cost to create or acquire your products. This is before deducting other expenses needed to run your business. And it’s defined as a percentage of your overall revenue.
To use a super simple example:
- It costs you $6 to make or buy something you intend to sell
- You are able to sell that item for $10.
Your gross profit on that order would be $4, which would equate to a gross margin of 40%.
As for why gross margin is an important number to watch, let’s just say that it’s the starting point for any successful eCommerce business. If you aren’t making enough profit on each and every item you sell, you won’t be able to cover the additional expenses to run your business.
We will follow up with a more in-depth explanation, and some benchmarks on what a “good” gross margin looks like, so check back soon.
How do I find my gross margin?
Seller Ledger’s gross margin functionality only works for customers who are tracking costs on a per-item basis. You don’t need to track every single item cost, but the more you do, the more accurate your gross margin calculation will be.
If you click into the Inventory -> Sold view, you will now see a summary at the top of the screen that shows you the gross margin value and the percentage of transactions on which it’s based. To increase that percentage, you can enter more cost information for more orders.
In addition, there is a new dashboard tile that shows your gross margin for the current month. We have replaced the old “Cost of Goods” tile for inventory trackers, as this new information contains more detail – not only how much cost information you’ve entered, but also how much profit you’re generating.
Stay tuned for more updates in this direction, as we continue to look for ways to provide more insight into your business.