E-commerce guide
How to Calculate True Profit per Order
A step-by-step order profit method that includes product cost, shipping, ad spend, platform fees and returns.
Start with collected revenue
Use the amount earned from the order, excluding taxes collected on behalf of authorities. Include shipping paid by the customer when it becomes part of your payout or marketplace fee base.
Subtract product and packaging cost, outbound shipping, payment or marketplace fees, advertising attributed to the order and any other variable fulfillment expense. The remainder is contribution profit, not necessarily final business profit.
Do not hide variable costs in overhead
A cost that occurs because an order happened belongs in the order calculation. Common omissions include pick-and-pack charges, shipping insurance, marketplace fixed fees, packaging inserts and currency conversion. Monthly software and payroll are usually reviewed separately unless you deliberately allocate them per order.
Model returns as an allowance
When a product has a stable returns history, multiply return rate by average net loss per return and include that expected amount as a per-order cost. This produces a more useful forecast than pretending every order will be kept.
Test the numbers
Use your own current costs and keep a dated note for every marketplace fee, carrier rule or operating assumption that may change.