Overview
Gross margin is the percentage of revenue left after you subtract the cost of goods sold, before any operating expenses. It is the first and broadest measure of how profitable a product is.
On TikTok Shop, gross margin sets the headroom you have to spend on commission, fees, and ads while still making money.
How it works
Gross margin is (revenue minus COGS) divided by revenue, as a percentage. A $40 product that costs $12 to make has a gross margin of 70%. From there, fees, commission, and ad spend eat into it.
Why it matters
A high gross margin gives you room to offer competitive commission and spend on creators while staying profitable. A thin gross margin leaves almost nothing for the creator program, which limits how aggressively you can grow.
How brands use it
Brands protect gross margin through pricing and sourcing, then decide how much of it to invest in commission and ads to fuel creator-driven growth.
