Net Profit Margin 101: Definition, Formula & Insights (2025)
- High Net Profit Margin: Shows efficient cost control, smart resource allocation, and an effective pricing strategy.
- Low Net Profit Margin: Indicates challenges in growing sales or managing expenses.
- Net Income: €1,443 million
- Total Revenue: €25,615 million
- Net Profit Margin = (€1,443m / €25,615m) x 100% = 5.63%
- Household Products: An average net profit margin is around 11.25%, so IKEA’s 5.63% is slightly below the industry average.
- Apparel Brands: Average around 5.07%, so a 10% margin in this sector would be considered high.
- Increase Sales – But this typically requires more investment in marketing and expansion, leading to higher costs.
- Decrease Costs – Be cautious not to compromise product quality, as it may negatively impact customer retention.
- Gross Profit Margin: Only accounts for COGS, excluding operating and non-operating expenses.
- Operating Margin: Includes operating costs but omits non-operating costs.
Founder of TrueProfit & eCommerce Profitability Expert
Harry Chu is the Founder of TrueProfit, a net profit tracking solution designed to help Shopify merchants gain real-time insights into their actual profits. With 11+ years of experience in eCommerce and technology, his expertise in profit analytics, cost tracking, and data-driven decision-making has made him a trusted voice for thousands of Shopify merchants.
Harry Chu is the Founder of TrueProfit, a net profit tracking solution designed to help Shopify merchants gain real-time insights into their actual profits. With 11+ years of experience in eCommerce and technology, his expertise in profit analytics, cost tracking, and data-driven decision-making has made him a trusted voice for thousands of Shopify merchants.
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