Margin, or gross margin, is the difference between what you charge for a product and what it costs you to buy or make, expressed as a percentage of the selling price. It answers a simple question: of every dollar a customer pays, how much is left after covering the cost of the goods. A product sold at 15 dollars that costs 10 dollars leaves 5 dollars, which is a 33 percent margin.
How to calculate it
The formula is (selling price minus cost of goods) divided by selling price, times 100. Using the example above: (15 minus 10) divided by 15 equals 0.33, or 33 percent. Note that margin is not the same as markup. Markup measures profit against cost, so the same product has a 50 percent markup (5 divided by 10) but a 33 percent margin. Mixing the two up is one of the most common pricing errors.
Why it matters
Margin tells you whether a sale is actually worth making. Two products can carry the same dollar profit but very different margins, and the higher-margin item gives you more room to absorb discounts, shipping, and overhead. Tracking margin per product and per order keeps you from chasing revenue that does not cover your costs.
In B2B quoting on Shopify
Margin becomes central the moment you negotiate. Wholesale buyers expect volume discounts, so every price concession eats directly into margin. Before you drop a line price or apply a percentage off, it helps to know your floor: the lowest price that still clears an acceptable margin. When you build quotes as Shopify draft orders, you can see costs against your custom prices and confirm the deal holds up before the buyer accepts and pays. For related terms, see the B2B quoting glossary.