Gross Profit vs Operating Profit in Print-on-Demand

Confused about profit metrics? Start with our guide: The Complete Guide to Tracking Profits in POD. If you’re ready to skip spreadsheets and see real profit in real time, connect your store at PodVector. For standard accounting definitions, see Corporate Finance Institute.

Definitions: Gross vs Operating Profit

Gross Profit = Revenue – Cost of Goods Sold (COGS). In POD, COGS means the base product + printing cost.

Operating Profit = Gross Profit – (Shipping + Transaction Fees + Ad Spend + Refunds + Other Costs).

Think of gross profit as the product margin and operating profit as the business margin.

Example: Same Gross Profit, Different Operating Profit

Let’s say you sell 100 t-shirts at $30 each:

• Revenue: $3,000
• COGS: $1,200 ($12 per shirt)
• Gross Profit: $1,800

Now add other real costs:

• Shipping: $400
• Shopify/PayPal fees: $120
• Ad spend: $900
• Refunds: $150

Operating Profit = $1,800 – ($400 + $120 + $900 + $150) = $230

Both sellers have the same gross profit, but one might walk away with almost no operating profit after real costs. That’s why relying on gross profit alone is misleading.

Why Gross Profit Matters

Gross profit is important because:

• It shows if your product pricing is sustainable.
• It tells you how much “room” you have for ads, shipping, and fees.
• It’s the first check—if your gross margins are weak, nothing else can save profitability.

Why Operating Profit Matters

Operating profit is more critical for POD sellers because:

• It shows if the business itself is profitable, not just the products.
• It accounts for ad spend, the biggest cost lever in POD.
• It includes fees and refunds, which silently drain margins.
• It’s the number that determines your cash left over after a sales period.

That’s why most professional POD sellers aim for at least 5–10% operating profit margin.

Benchmarks in POD

• Gross profit margins: Often 40–60% for t-shirts, mugs, and hoodies.
• Operating profit margins: Healthy stores usually land between 5–10%.
• Warning signs: If operating profit is negative while gross profit looks good, you’re overspending on ads or shipping.

How to Track Both (Manual vs Automated)

Manual (Spreadsheets)

1. Export total sales and refunds from Shopify.
2. Pull COGS + shipping from Printify/Printful.
3. Add ad spend from Meta/Google/TikTok dashboards.
4. Include transaction fees from Shopify/PayPal/Stripe reports.
5. Subtract step 2–4 from sales to calculate gross vs operating profit.

Automated (PodVector)

If you want to skip spreadsheets, connect your store to PodVector. It automatically syncs Shopify, Printify/Printful, and ad platforms so you can see gross profit, operating profit, and margins in real time.

FAQs

What’s the difference between gross margin and operating margin?

Gross margin = gross profit ÷ revenue. Operating margin = operating profit ÷ revenue. Operating margin always gives the truer picture of profitability.

Can I run a POD business on gross profit alone?

No. Gross profit looks healthy until shipping, ads, and fees catch up. Many POD sellers who rely only on gross profit end up with cash flow issues.

What’s a “safe” operating profit margin?

For POD, aim for 5–10%. Below that, you risk being wiped out by seasonal ad inflation or unexpected refunds.

Does PodVector show both gross and operating profit?

Yes. PodVector separates gross profit and operating profit so you can see both your product margin and your true business margin in one dashboard.