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How do I calculate gross margin by sales channel for an online and physical retailer?
Gross margin by channel is channel revenue minus the cost of goods sold for that channel's sales, divided by channel revenue. Calculate it separately for each channel, such as web store, shop floor and marketplace, and include costs that belong only to that channel, such as marketplace commission, payment fees and packaging.
Formula in words: (channel revenue minus product cost minus channel-specific selling costs) divided by channel revenue.
It matters because a blended margin hides channels that look busy but earn little once fees, discounts, shipping subsidies and returns are charged to them.
Commonly misread:
- Using list price instead of the price actually paid after discounts.
- Leaving out free-shipping cost or payment fees on online orders.
- Using one average product cost for every channel when stock was bought at different prices.
Decide up front which costs sit above the margin line, and apply that rule to every channel.
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