Revenue minus cost of goods sold, expressed as a percentage. For SaaS, this is typically 70-85%.
(Revenue - COGS) / Revenue × 100
Higher is better · Unit: percentage
How to Improve
Invest in engineering efficiency to reduce per‑customer compute and storage costs. Build self‑service tools that reduce the need for professional services. Migrate to more cost‑effective cloud infrastructure or negotiate enterprise agreements. Automate quality assurance and deployment to reduce engineering overhead. Focus on product‑led delivery models that scale without linear cost increases.
Ehsan's Analysis
E-commerce gross margin benchmarks (40-60% for most categories) hide the metric that actually determines business viability: contribution margin after fulfillment. Take a $50 product with 60% gross margin = $30 gross profit. Subtract $8 shipping, $3 packaging, $2 returns processing (assuming 20% return rate at $10 cost), and $1.50 payment processing. Contribution margin = $15.50, or 31%. Now subtract $25 CAC and you are underwater on the first purchase. This is the DTC math that killed dozens of venture-backed brands. The brands that survive (Warby Parker, Allbirds at scale) got contribution margin after fulfillment AND acquisition above 15%, which requires either premium pricing, owned retail, or repeat purchases within 60 days. Every e-commerce founder should tape their contribution margin after fulfillment to their monitor. It is the only margin number that matters.
EJ
Ehsan Jahandarpour
AI Growth Strategist & Fractional CMO
Forbes Top 20 Growth Hacker · TEDx Speaker · 716 Academic Citations · Ex-Microsoft · CMO at FirstWave (ASX:FCT) · Forbes Communications Council
Frequently Asked Questions
What is a good Gross Margin for E-commerce companies at Series B stage?
The median Gross Margin for E-commerce companies at the Series B stage is 47%. Top‑quartile companies (75th percentile) significantly outperform this baseline. The most important factor is consistent improvement over time rather than hitting any single target number.
How does Gross Margin differ by company stage in E-commerce?
Gross Margin typically improves as E-commerce companies mature from seed through growth stage. Earlier‑stage companies should benchmark against stage‑appropriate peers rather than comparing themselves to mature companies.
How often should E-commerce companies measure Gross Margin?
E-commerce companies at the Series B stage should track Gross Margin monthly with quarterly deep‑dive analysis. Set up automated dashboards and alerts for significant deviations from your baseline.
What factors most impact Gross Margin in the E-commerce sector?
In E-commerce, the primary factors impacting Gross Margin include product‑market fit maturity, competitive landscape intensity, customer segmentation strategy, pricing optimization, and operational efficiency. Series B‑stage companies should focus on the one or two highest‑leverage factors rather than trying to optimize everything simultaneously.
How does Gross Margin for E-commerce compare to cross‑industry benchmarks?
E-commerce Gross Margin benchmarks can differ significantly from cross‑industry averages due to factors specific to the E-commerce vertical including customer acquisition dynamics, competitive intensity, and typical deal sizes. Always compare against industry‑specific benchmarks rather than broad averages for meaningful insights.