Gross profit and net profit are the two numbers every store owner confuses — and the gap between them is where most profit hides. Gross profit is what's left after the cost of the product; net profit is what's left after every cost. You can have a strong gross profit and still lose money.
Gross profit: revenue minus COGS
Gross profit = Revenue − COGS
Gross profit subtracts only your cost of goods sold — what the product cost you to buy or make. It tells you how much each sale contributes before any of your other costs. As a percentage of revenue it's your gross margin.
Net profit: after every cost
Net profit = Revenue − COGS − fees − shipping − ad spend − returns − other costs
Net profit keeps subtracting: payment and gateway fees, shipping you paid, ad spend to win the sale, refunds and returns, and everything else tied to fulfilling the order. It's the number that actually lands in your pocket — your true profit.
The difference, side by side
| Gross profit | Net profit | |
|---|---|---|
| Subtracts | COGS only | COGS + all other costs |
| Answers | Is the product priced right? | Does the business make money? |
| Usually | Higher | Lower (sometimes negative) |
Worked example
A $100 order. COGS $40 → gross profit $60 (60% gross margin). Now subtract a $3 payment fee, $6 shipping and $10 ad spend → net profit $41 (41% net margin). Same sale, two very different numbers.
Push ad spend to $30 on that order and net profit falls to $21 — even though gross profit never moved. That's why gross profit alone is dangerous: it can look healthy while net profit quietly slips toward zero.
Which one should you watch?
- Gross profit / margin — for pricing and product decisions. Is this product worth selling at this price?
- Net profit / margin — for the health of the business. Are you actually making money after ads, fees and shipping?
Both matter — see how to calculate profit margin for the percentages.
See both on every order
Working out net profit by hand, per order, isn't realistic. ProfitVaultcomputes gross and net profit on every Shopify order automatically — pulling COGS, fees, shipping, attributed ad spend and returns — then rolls it up by day, product and period.