Metrics & KPIs

Gross Margin

Revenue minus COGS, as a percentage of revenue. A broader measure than contribution margin because it excludes ad spend.

Gross margin = (Revenue − COGS) / Revenue. It's what's left after paying your supplier but before paying for anything else — ads, tools, payroll, overhead. Gross margin is the ceiling of what's possible for your store's profitability, and dropshipping generally sits at 55-75% gross margin, compared to 30-50% for traditional retail.

The gap between gross margin and contribution margin is what you spend on ads. If gross margin is 65% and contribution margin is 25%, you're spending 40% of revenue on ads. That's the knob you turn when you want to scale (spend more, contribution margin shrinks) or preserve cash (spend less, contribution margin expands).

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Related terms in Metrics & KPIs
AOV
Average Order Value — the average dollar amount a customer spends per transaction. Total revenue divided by number of orders.
AOV Lift
The increase in Average Order Value produced by a specific tactic — bundles, upsells, order bumps, quantity discounts. Every dollar of AOV lift compounds against ad spend.
ATC
Add to Cart — the tracked event when a visitor adds an item to their cart. ATC-to-purchase ratio is a powerful diagnostic of checkout friction.
Attach Rate
The percentage of orders that include a secondary item — typically an upsell, bundle, or order bump. Every 10% of attach rate is ~4-6% of AOV lift.
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