Pricing tools

Clothing Profit Margin Calculator: Gross Margin, Net Margin and Price Needed

A clothing profit margin calculator should tell you what you actually keep from each sale, not only what is left after the factory bill. Enter your selling price, your product cost and the other costs that ride on every order, and see the gross margin, the contribution margin and the profit per piece. You can also set a target and work backwards to the price it demands.

Clothing Profit Margin Calculator: The Short Answer

A brand owner staring at a £14 product cost and a £40 price tag usually thinks the margin is 65%. That is the gross margin, and it is only the first layer. Once £6 of packaging, fulfilment and payment fees is taken off, £20 of profit is left from each £40 sale, which is a 50% contribution margin. This clothing profit margin calculator shows both numbers side by side, so you can see how much of your price survives the costs that follow the garment out of the factory.

65%Gross margin on a £40 price and £14 product cost
50%Contribution margin after £6 of other costs
£20Profit per piece in that example
£57.14Price needed for a 65% contribution margin on £20 of total cost

The example is illustrative, but the logic works for any price and cost. The rest of this page explains the three kinds of margin, what to put in the other costs box, how channel choice changes the answer, and how to set a price from a margin target. If you only want a quick check, scroll to the clothing profit margin calculator, change the three prices and read the result. If you want to understand the result, read on: a number you cannot explain is hard to defend when a supplier, a stockist or an investor asks about it.

Use the Clothing Profit Margin Calculator

Enter the price you charge before VAT, the product cost per piece and, if you want a fuller picture, the other costs that attach to every order. If you import, use the landed cost, which includes freight and duty, as the product cost. The clothing profit margin calculator then reports the gross margin, the contribution margin, the profit on each piece and a bar that shows how the price divides between cost and profit.

Clothing profit margin calculator

Gross margin, contribution margin and price needed

Margins are shown before overheads such as rent, salaries and software. VAT is not included, so enter prices before VAT.

The target box works in reverse. Type the contribution margin you want and the calculator returns the price that delivers it on your current costs. That is the quickest way to test whether a price point is realistic before you commit to a production run.

Gross Margin, Contribution Margin and Net Margin

Three terms get used loosely in clothing, and each answers a different question. Gross margin looks only at the product: price minus product cost, divided by price. Contribution margin goes one step further and removes the variable costs that rise with every sale, such as packaging, picking, postage and payment fees. Net margin removes everything, including overheads like rent and salaries, so it depends on the size of the whole business.

The three margins compared

MarginWhat it removes from the priceWhat it tells you
Gross marginProduct cost (landed cost if imported)Whether the garment itself is priced well
Contribution marginProduct cost plus variable costs per saleWhat each sale adds toward fixed costs and profit
Net marginAll costs, including overheadsWhether the business as a whole makes money

Definitions for orientation. Accountants may group costs differently, so agree the terms with whoever prepares your accounts.

For day-to-day pricing the contribution margin is the most useful, because it is the number that pays for everything else. A high gross margin can hide a weak contribution margin when postage and returns are heavy, which is common in clothing sold online. Fashion has a particular weakness here: sizes and colours multiply the number of things that can be returned, so a style with a healthy gross margin on paper can earn far less than the clothing profit margin calculator suggests once the returns are counted. That is why this page asks you to enter other costs rather than stopping at the factory price.

What to Put in Other Costs per Piece

The other costs box is where many margin calculations go wrong, because the costs it holds are easy to forget until the first month of sales. Think about everything that happens to a garment after it arrives in your warehouse and before the customer keeps it.

Variable costs worth counting per piece

  • Packaging: mailer, tissue, hang tags and inserts
  • Picking, packing and fulfilment labour or a third-party fee
  • Outbound postage if you absorb it
  • Payment processing fees on the sale
  • Marketing cost per sale, if you track it
  • An allowance for returns, covered in our guide below

Use your own figures. Costs differ by channel and by how you fulfil orders.

Returns deserve their own line. A returned garment may be resold at full price, resold at a discount or written off, and each case changes your margin differently. Our return rate calculator for clothing turns a returns percentage into a cost per sale you can paste straight into the other costs box.

How Channel Choice Changes Your Margin

The same garment earns a very different margin depending on who sells it. A direct-to-consumer sale gives you the full retail price but loads marketing and fulfilment onto you. A wholesale sale gives you a lower price but moves most of those costs to the retailer. The table compares the two on the same £14 product cost.

Illustrative margin by sales channel on a £14 product cost

LineDirect to consumerWholesale
Selling price before VAT£40.00£20.00
Product cost£14.00£14.00
Packaging, fulfilment and fees£6.00£1.50
Marketing cost per sale£8.00£0.00
Profit per piece£12.00£4.50
Contribution margin30.0%22.5%

Illustrative assumptions, not benchmarks. Real marketing, fulfilment and wholesale terms vary widely.

Direct sales earn more per piece but only if marketing stays under control. Wholesale earns less per piece but needs far less spend per unit sold, which is why many brands use both. The guide to pricing clothing for wholesale and retail explains how to set both prices from the same cost.

Where a £40 Price Goes

The pie shows the first example as a share of the price. Half the money is profit, a little over a third pays the factory, and the rest covers the other costs. If any slice grows, the profit slice shrinks, because the price stays the same.

Illustrative split of a £40 price before VAT

  • Product cost35%
  • Other costs per piece15%
  • Profit per piece50%

Illustrative. From the calculator default: £14.00 product cost, £6.00 other costs and £20.00 profit out of £40.00.

A useful exercise is to adjust one slice at a time. Raise the product cost by £2 and ask what price restores the same margin, or cut the other costs by £1 and see how much room you gain. The calculator above does this instantly.

Price Needed for a Target Margin

If you know the margin you need, work out the price instead of guessing it. The formula is price = total cost ÷ (1 − target margin). With £20 of total cost per piece, the prices below deliver each target contribution margin.

Price needed on £20 of total cost per piece

Target contribution marginPrice needed before VATProfit per piece
40%£33.33£13.33
50%£40.00£20.00
60%£50.00£30.00
65%£57.14£37.14
70%£66.67£46.67

Calculated from price = total cost ÷ (1 − margin), with £14 product cost and £6 other costs. Illustrative.

A target margin that needs a price your customers will not pay is a signal to look at cost, not only at price. Our clothing markup calculator shows the same relationship from the markup side.

How Other Costs Erode Your Margin

Small per-piece costs add up quickly because they come off a fixed price. The chart holds the £40 price and £14 product cost constant and shows what happens to the contribution margin as the other costs rise.

Contribution margin on a £40 price as other costs rise

Margin on price

Other costs £065%
Other costs £357.5%
Other costs £650%
Other costs £942.5%
Other costs £1235%

Illustrative arithmetic: (£40 − £14 − other costs) ÷ £40. Product cost is held at £14.

Every extra £3 of cost removes 7.5 points of margin on this price. That is why packaging choices, free-postage thresholds and payment fees are worth reviewing, and why a simple view of gross margin can mislead. Use the clothing profit margin calculator to test your own version of the chart: change the other costs box in £1 steps and watch where the contribution margin crosses the level you need.

Reading Your Margin: A Short Routine

Run the same four-step routine whenever you price a new style, so margins stay comparable from one product to the next.

A repeatable margin check

  1. 1Find the true costUse landed cost, not the factory quote alone.
  2. 2Add variable costsInclude packaging, fulfilment, fees and marketing per piece.
  3. 3Test the priceEnter the price before VAT and read the contribution margin.
  4. 4Stress the resultRaise costs and add a discount to see how far the margin falls.
Before you commit to a run

Ask whether the style still earns a margin you can live with at the lowest price you expect to sell it, not only at full price. Our break even calculator for a clothing brand shows how many sales you need to cover your fixed costs. Current UK VAT guidance is on GOV.UK VAT rates, and the tax authority's wider guidance is on HMRC.

How Ruhrose Helps You Protect Your Margin

Ruhrose develops hoodies, fleece, jersey, denim and woven casualwear for UK buyers, with production in Bangladesh. Margin is decided long before a garment is sold, in the specification, the fabric choice and the order plan, so we explain what drives cost per piece, sample before bulk and help you avoid changes that add cost late. Our guide to the cost of starting a clothing line covers the wider budget, and Ruhrose's clothing manufacturing services are described on the main site.

Ask yourself one question before you lock a price: which cost in this calculation are you least sure about, and what happens to your margin if it is wrong?

FAQs

Subtract your product cost, and any other costs per piece, from the selling price before VAT, then divide by the selling price. A £40 price with £14 product cost leaves a 65% gross margin. With £6 of other costs the contribution margin is 50%.
Gross margin removes only the product cost from the price. Contribution margin also removes variable costs per sale, such as packaging, fulfilment, payment fees and marketing. Contribution margin shows what each sale contributes toward overheads and profit.
It depends on your channel, price point and costs, so there is no single good figure. Compare the contribution margin with your fixed costs and the margin you need. A margin that looks high before returns and marketing may be thin once they are counted.
No. Use prices before VAT, because the VAT you charge is passed to HMRC and is not your revenue. If your price includes VAT, divide by 1.2 for the standard rate before you enter it. Check current rules on GOV.UK.
Divide your total cost per piece by one minus the margin you want, in decimals. With £20 of total cost, a 60% margin needs £20 ÷ 0.4, which is £50. The calculator does this when you enter a target margin.
Not automatically. Add a per-piece allowance for returns in the other costs box, and test a discounted price in the price box. You can then see the margin at the lowest price you expect to sell the style for.

Want a cost you can stand behind?

Share your style, fabric and quantity with us. We will explain what is in the cost per piece so your margin starts from a firm number, not a guess.