Profit margin rate

The profit margin rate is a financial indicator that expresses the ratio between gross margin and the purchase cost excluding tax. It should not be confused with the markup rate, which is calculated against the selling price. The profit margin rate shows how much percentage of gross profit is generated for each monetary unit invested in purchasing goods.

The formula for the profit margin rate is: Profit margin rate = (Gross margin / Purchase cost excluding tax) x 100. For example, for a product purchased at 20 EUR and sold at 50 EUR, the gross margin is 30 EUR. The profit margin rate is therefore (30 / 20) x 100 = 150%. This means the gain represents 150% of the initial purchase cost. A profit margin rate above 100% indicates that the margin exceeds the acquisition cost.

In e-commerce, the profit margin rate is a strategic lever for negotiating with suppliers and adjusting selling prices based on profitability targets. With Fullmetrix, you can analyze the profit margin rate by product, by supplier, or by category, track its evolution over time, and detect profitability declines before they impact your results.