Revenue minus cost of goods is not profit. This works an order all the way down — through the shipping label you actually paid, payment fees, packaging and what it cost to acquire the customer.
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What the customer paid, excluding tax and shipping
Landed cost — include inbound freight and duty
What the carrier invoiced, not what you charged
Your gateway's percentage rate
Per-transaction amount
Box, filler, insert, pick and pack
All acquisition spend ÷ new customers
At a 49.0% contribution margin your break-even ROAS is 2.04x. Any campaign returning less than that loses money, however healthy the gross margin looks.
The inputs matter more than the arithmetic, and four of them are commonly wrong.
Order value is what the customer paid after discount, without tax or shipping charged. Tax was never your money and shipping revenue is usually paid straight out to a carrier.
Cost of goods is landed cost, including inbound freight and duty. Supplier price alone understates imported products.
Shipping is the carrier invoice, not the rate card and not what you charged. Surcharges for fuel, residential delivery, remote areas and dimensional weight routinely add thirty to sixty percent on top of the quoted rate.
Acquisition cost is all acquisition spend divided by genuinely new customers — including agency fees, tax on ad invoices and welcome discounts. Platform cost per purchase understates this by twenty to forty percent.
Two numbers matter more than the total. Contribution margin is the ceiling on what a customer can cost. Profit after acquisition is what one order leaves toward fixed costs.
If the second figure is positive, growth funds itself. If it is negative, every additional order deepens the loss while revenue rises — a failure that is invisible in any revenue report and in most advertising dashboards, because neither knows what fulfilment cost.
Fixed costs — apps, software, salaries, rent — which belong at the period level rather than against one order. And late-arriving costs like carrier adjustments, chargebacks and refunds, which attach to orders weeks after they ship and make any fresh figure optimistic rather than final.
Start from what the customer paid after discount, excluding tax and shipping charged. Subtract landed cost of goods, then the shipping label you actually paid, payment fees, packaging and fulfilment. What remains is contribution margin. Subtract acquisition cost for profit after acquiring the customer.
Shopify reports gross profit from the cost per item you enter and stops there. It has no visibility into carrier invoices, payment processing deducted inside payouts, or advertising spend, so its figure is always higher than what you keep.
Tax charged on gateway fees, carrier weight adjustments billed weeks later, fees retained on refunded orders, return freight, and foreign exchange spread on international payouts. None of them produce an invoice, so none prompts an entry.
No. This is profit after acquisition on a single order. Net profit also subtracts fixed costs — apps, software, salaries, rent — which do not scale per order and belong at the period level rather than against one sale.
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