Glossary
Gross Margin
The percentage of revenue left after the direct cost of producing what was sold.
Gross Margin = (Revenue − Cost of Goods Sold) / Revenue × 100%. It captures the percentage of each sales dollar left after the direct cost of producing the goods or services that were sold.
Gross margin is the cleanest read on pricing power and unit economics. Software firms routinely clear 70–85%; supermarkets and airlines operate in the high single digits to low twenties because their cost of sales is structurally large.
A persistently declining gross margin signals either input-cost pressure that cannot be passed through to customers, or weakening pricing power — usually a sign of intensifying competition or commoditisation.