Learn the numbers behind ecommerce profit

Glossary terms

• Contribution Margin

  Contribution margin shows how much money remains from an order after variable costs such as fees, shipping, ads, and returns.

• Net Margin

  Net margin is the percentage of order revenue left as profit after estimated ecommerce costs and reserves.

• Breakeven Price

  Breakeven price is the minimum sale price needed to cover product cost, fees, shipping, ads, returns, and reserves.

• Ad Cost Per Order

  Ad cost per order connects advertising spend to ecommerce profit by showing acquisition cost for each sale.

• Return Reserve

  Return reserve is a planning allowance for refunds, damaged items, replacement orders, and return handling costs.

• Marketplace Referral Fee

  A marketplace referral fee is the commission a marketplace charges on a sale, often varying by category and region.

• ROAS

  ROAS means return on ad spend, but ecommerce sellers should compare it with contribution margin before scaling ads.

• Landed Cost

  Landed cost is the full product cost after purchase price, freight, duties, packaging, and preparation costs.