Most healthy small ecommerce businesses run a net margin between 10 and 20 percent, with handmade and niche products often higher and resale or dropshipping lower. The more useful question is not what is normal but what your own margin needs to be to cover your fixed costs.
Gross margin and net margin are different
Gross margin is what is left after the cost of the product itself. Net margin is what is left after everything: fees, shipping, advertising, software, your own time.
Sellers quote gross margin to each other and then wonder why the bank balance disagrees. When someone says they run at 60 percent, they almost always mean gross.
Rough benchmarks by model
- Handmade: gross margin often 50 to 70 percent, but only if labour is genuinely costed. Net is far lower.
- Private label on Amazon: 25 to 40 percent gross, 10 to 20 percent net after FBA fees and advertising.
- Print on demand: 30 to 40 percent on a well-priced item, considerably less on a cheap one.
- Resale and thrifting: highly variable, driven by sourcing skill rather than pricing strategy.
- Dropshipping: often 10 to 15 percent, which is why it depends on volume and cheap traffic.
Treat these as orientation, not targets. Use the Profit Margin Calculator on your own products.
The number that actually matters
Your fixed costs divided by your contribution per unit tells you how many units you must sell before you earn anything at all. That is a far more actionable figure than an industry average, and it changes the moment you adjust price or cost. The Break-Even Calculator works it out, including how many units it takes to hit a profit goal rather than merely surviving.
Why a small price rise moves everything
Margin improvements compound in a way cost cutting rarely does. If your contribution per unit is $5 and you raise price by $1, contribution rises 20 percent and the units you need to break even fall by roughly the same share. That is usually easier than finding 20 percent of savings in a supply chain you do not control.
Use the Markup vs Margin Calculator to find the price that produces the margin you want, rather than adding a percentage to cost and hoping. The difference between those two approaches is explained in markup versus margin.
When a low margin is fine
High volume with fast stock turnover can work on thin margins, and a loss-leading product that reliably brings repeat buyers can be worth running near zero. Both are strategies. Neither works by accident, and both require knowing the number precisely enough to decide on purpose.