Are marketing costs included in gross profit?

While calculating gross profit margin, your marketing expenses are not included in your gross profit. Your gross profit is the revenue you earned through your sales minus the cost of goods minus the marketing expenses. In short, your marketing cost is subtracted from the product's price and from the revenue you earn. In the end, the remaining result is your gross profit.

I suggest that you also key in a few other factors when calculating the profit of your Shopify store, as new owners frequently make the same mistakes, like not properly calculating expenses or over/underpricing their goods.

No, marketing costs are not included when calculating e-commerce gross profit margin. The gross profit formula only includes the costs involved in producing and selling its products. Marketing costs are included when calculating the net profit of the business.

Your gross profit is the revenue obtained after excluding the cost associated with producing goods and services from the net sales. It only entails costs directly related to manufacturing goods and services — known as COGS. Some of the expenditures included in COGS are direct material cost, direct labour cost, shipping cost, etc. Hence, marketing expenditures are not part of COGS and come down in the section of Operating expenses, impacting your net profit.