Seller guide

How to Calculate Ecommerce Profit

Ecommerce profit is not just sale price minus product cost. A realistic profit calculation needs to include platform fees, payment processing, shipping, returns, tax or overhead, and advertising cost.

Basic formula

Net profit = revenue - product cost - shipping cost - platform fees - payment fees - return loss - tax or overhead - ad spend.

Revenue should include the product sale price and any shipping charged to the customer. Costs should include all product-level costs that change when you sell another unit.

1. Start with product revenue

Product revenue is the sale price multiplied by units sold. If you charge shipping separately, add shipping revenue separately so you can compare it against your actual fulfillment cost.

2. Subtract product and shipping cost

Product cost should include supplier cost, manufacturing cost, packaging, inbound freight, duties, or any landed cost you can attribute to one unit. Shipping cost should include fulfillment, FBA-style fees, carrier labels, or supplier shipping in a dropshipping model.

3. Include marketplace and payment fees

Marketplace fees and payment processing fees can change the economics of a product quickly. A product that looks profitable at gross margin level can become unprofitable after referral fees, transaction fees, and fixed per-order payment costs.

4. Add returns and refunds

Returns reduce profit because you may lose shipping cost, processing time, damaged inventory, payment fees, or part of the product cost. High-return categories need a conservative return-rate assumption.

5. Compare ad spend against break-even ROAS

Break-even ROAS tells you the minimum return on ad spend required before ads are profitable. If a campaign generates sales but stays below break-even ROAS, revenue can grow while profit falls.

Example

If a product sells for $50, costs $18 to source, costs $5 to ship, pays 8% in platform and payment fees, and spends $10 per sale on ads, the net profit is much lower than the visible $32 gross spread. The calculator helps expose that real number before you scale.

Next step

Use the Ecommerce Profit Calculator or the Break-even ROAS Calculator to test your own numbers.