Gross Profit Margin by Industry
Margins are shaped by how a business creates value. Here is a practical benchmark table across major industries — and the reason each one looks the way it does.
Benchmark Table
Use these as orientation ranges, not exact targets — real figures vary by size, region and business model.
| Industry | Typical gross margin | Why |
|---|---|---|
| Software / SaaS | 70–85% | Near-zero cost to deliver one more unit |
| Professional services | 50–70% | Cost is mostly billable labour |
| Restaurants | 60–70% | Food cost ~30% of menu price |
| Pharmaceuticals | 60–80% | High IP value, low unit cost |
| Apparel / specialty retail | 40–60% | Brand and markup power |
| E-commerce / general retail | 20–40% | Price-competitive, resold goods |
| Manufacturing | 15–35% | Heavy materials and labour input |
| Construction | 15–25% | Materials, subcontractors, equipment |
| Automotive (dealers) | 10–20% | High-cost goods, thin per-unit profit |
| Grocery | 10–15% | Commodity goods, volume model |
The Pattern Behind the Numbers
One rule explains almost the whole table: the closer the cost of delivering one more unit is to zero, the higher the gross margin.
- Digital products (software, IP) — one more copy costs almost nothing → very high margin.
- Labour-based services — cost scales with billable hours → high but not extreme.
- Physical resale (retail, grocery) — you re-buy stock for every sale → low margin, made viable by volume.
Don't compare across columns. A 25% margin is weak for software but perfectly healthy for construction. Always benchmark within your own industry.
How to Use This Table
Find your row, calculate your actual margin with the gross profit margin calculator, and see where you sit in the range. Below the range signals a pricing or cost problem; at the top suggests strong pricing power. Then read how to improve profit margin for concrete next steps.
Compare your margin to your industry
Calculate your exact gross margin, then see where it lands against the benchmark.
Open the Margin CalculatorFrequently Asked Questions
What is the average gross profit margin by industry?
+It ranges widely: software 70–85%, services 50–70%, retail 20–40%, manufacturing 15–35%, construction 15–25%, grocery 10–15%. Always compare within your own sector.
Why do software companies have such high margins?
+Because the cost of delivering one additional unit is almost zero. Once the product is built, extra customers add revenue with very little extra direct cost.
Why is grocery margin so low?
+Groceries are commodity goods resold with little transformation, so direct cost is high relative to price. The model works through very high sales volume.
Is a 25% gross margin good?
+It depends on the industry. For construction or manufacturing it can be solid; for software it would be very low. Benchmark against your own sector.
How do I compare my margin to my industry?
+Calculate your gross margin accurately, find your industry's typical range, and see whether you fall below, within, or above it — then track the trend over time.
This guide is general business education, not financial or accounting advice. Margin norms vary by industry, region and business model — always validate against your own figures and a qualified advisor where needed.