What is Gross Margin in Retail? Explained

Gross margin is a vital financial metric, representing the percentage difference between a retailer's sales revenue and the cost of goods sold (COGS). Calculated by deducting COGS from total revenue and dividing by the total revenue, it serves as a measure of operational efficiency and profitability. A higher gross margin indicates better profitability, while a lower margin may signal the need for cost management or pricing adjustments. Monitoring and optimizing gross margins are essential for maintaining a healthy financial performance and providing insights into a business's effectiveness in managing production or procurement costs.