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There are a lot of variables to consider that make it difficult to come up with hard and fast numbers. In my client experience, these are some light guidelines based on the type of e-commerce store you are running.

Drop Shipping Stores

This is a tough business as far as gross margin goes. You’re essentially working on commission, so you’ve got a really tiny profit margin. I think my largest client in this category takes home around 8%. A great way to boost sales and margins here are upsell opportunities.

Private Label

Private label is when someone else manufactures the product, but it is under your brand name. These do a lot better than drop shipping. If a store is set up really well, about 50% is what they’re gonna take home. This won’t include advertising or the costs to acquire traffic. That’s always the wildcard.

Your Own Goods

This one is the real magic out of the three. You make and design your own goods and have them manufactured for you, or you manufacture it yourself and sell it. If it’s a luxury good, that could sell at 10x the cost of goods sold. Since, these goods could be 5x to 10 COGS, there is a way bigger profit margin. Although in this circumstance there could also be higher spend on materials.