Which products actually make you money? Your margin report knows

Sort your products by units sold and you get the list every merchant knows by heart. Sort them by gross profit and the list changes - sometimes dramatically. The hero SKU that moves ten a day on a thin markup slides down the page, and a quiet mid-catalog product that sells four a week at a fat margin turns out to be paying more of the rent. Most stores run promotions, reorders and shelf space off the first list. The money is in the second one.

Margin starts with a cost - but which cost?

Every margin number is revenue minus cost, and the cost you pick changes the answer:

• Current cost - what your supplier charges today (the cost sitting on the product in Shopify). Quick, always available, and honest enough for a first look - but it prices last quarter’s sales at this quarter’s cost.
• What you actually paid - the real receipt costs of the units you sold, including freight and duties, consumed in the order you received them. This is the accounting-grade answer, and the one that catches a margin quietly eroding as a supplier raises prices or a freight lane gets expensive.

The gap between the two is information. If a product’s margin looks fine at current cost but worse at receipt cost, your recent inventory cost more than the number you’re pricing from - and the erosion will reach the current-cost view a reorder later, when it’s harder to fix.

Read profit dollars first, percentages second

A 60% margin on a product that sold twelve units matters less than a 22% margin on one that sold nine hundred. Rank by gross profit dollars and you find the products that actually fund the business - typically a surprisingly short list. Most catalogs follow the 80/20 curve: the top slice of products contributes the large majority of profit, and knowing exactly where that line falls in your catalog tells you which SKUs deserve deeper stock, faster reorders and your best supplier negotiations.

Then flip to the other end. Every catalog carries products selling below their threshold - or below cost outright, usually by accident: a price set before a cost increase, a discount that never ended, a landed cost nobody worked back into the price. A margin report should surface these as their own list, worst first, because they’re not low performers - they’re leaks.

Margin ignores the shelf. GMROI doesn’t

Two products, both at 40% margin. One sells through its stock every six weeks; the other sits for eight months. Margin says they’re equal. Your cash flow disagrees.

GMROI (gross margin return on inventory investment) divides gross profit by the average value of inventory you held to earn it - profit per dollar parked on the shelf. Pair it with sell-through (units sold against units you had available) and slow, expensive “winners” stop hiding behind their percentage. A modest-margin product that turns fast can beat a high-margin product that doesn’t, and GMROI is the number that settles it.

When “no answer” beats a flattering guess

The quiet failure mode of margin reporting is the estimated number that looks precise. Units with no cost on record, costs in a different currency, sales from before you started tracking - a lazy report fills those gaps with zero cost and shows you a margin that’s better than reality. The honest move is to show no margin at all for what can’t be answered, count what’s not covered, and let the report say so. An overstated margin doesn’t just mislead - it points your attention away from exactly the products that need it.

Where to see yours

Stockroom’s margin report does all of the above for your store: products ranked by gross profit on either cost basis (real receipt costs by default, FIFO or weighted average to match your accounting), a margin-band overview, the below-threshold list, profit contribution with the 80/20 line, GMROI and sell-through per product, and a margin trend over time - plus CSV export and scheduled email delivery. It’s part of the free app, and it reads from the purchasing and receiving you’re already doing.

The first look is usually the most valuable one: somewhere in your catalog there’s a best seller that isn’t making money, and a sleeper that is. Better to be the store that knows which is which.