E-Commerce Financial Metrics That Matter

The direct costs of producing or purchasing the products you sell — including raw materials, manufacturing, packaging, and inbound shipping. In e-commerce, COGS determines your gross margin and is the first number you need to understand before anything else makes sense.

E-commerce COGS should include landed cost: the product cost plus shipping to your warehouse, customs duties, and any costs to make the product sellable. Many brands understate COGS by excluding these costs, which inflates gross margin and hides the true economics.

Revenue minus COGS, expressed as a percentage. Gross margin tells you how much of each dollar of revenue is available to cover operating expenses and generate profit. Healthy e-commerce gross margins range from 50-70% for DTC brands and 30-50% for resellers.

Gross margin varies dramatically by product category and business model. A brand selling custom jewelry at 75% gross margin operates very differently than one reselling consumer electronics at 25%. Your marketing budget, growth rate, and profitability timeline all depend on this number.

Revenue minus all variable costs per order — COGS, shipping, payment processing, packaging, and marketplace fees. Contribution margin shows you whether each order is actually profitable after all the costs directly tied to that sale. It is the true measure of unit-level profitability.

Many e-commerce brands are contribution margin negative and do not realize it. They see a $50 product with $15 COGS and think they are making $35, but after $8 shipping, $3 packaging, $1.50 payment processing, and $15 in ad spend, they are losing money on every order.

The total cost to acquire one new customer, including ad spend, influencer costs, discount codes, and the portion of marketing team salaries attributable to acquisition. For e-commerce, CAC has been rising steadily as digital ad costs increase and privacy changes reduce targeting effectiveness.

Track CAC by channel (Meta, Google, TikTok, organic, referral) to understand where your most efficient acquisition happens. Blended CAC can mask a channel that is burning cash while another channel carries the entire business profitably.

The financial cost of product returns, including lost revenue, return shipping costs, restocking labor, and the markdown on returned items that cannot be resold at full price. Returns are a hidden margin destroyer in e-commerce — the headline return rate understates the true financial impact.

A 20% return rate does not mean you lose 20% of revenue. You lose the revenue, pay for return shipping, spend labor processing the return, and often sell the item at a discount or write it off entirely. The true cost of a return can be 1.5-2x the original product cost.

Total revenue divided by the number of orders. AOV determines whether your unit economics can support your customer acquisition costs. Increasing AOV through bundles, upsells, and minimum-spend thresholds is often the fastest path to profitability for e-commerce brands.

AOV interacts with CAC to determine payback period. If your CAC is $40 and your AOV is $60 with a 50% contribution margin, you make $30 contribution per order — meaning each customer pays back their acquisition cost in a single purchase. If AOV is only $35, you need repeat purchases.

The number of days between paying for inventory and collecting revenue from selling it. A short cash conversion cycle means you are not tying up cash in unsold inventory for long. E-commerce brands with long cycles need significantly more working capital to operate.

If you pay suppliers net-30 but it takes 60 days to sell through inventory and another 3 days to receive payment, your cash conversion cycle is 33 days. Every day you can shorten this cycle reduces the working capital required to run the business.

How many times your entire inventory is sold and replaced over a given period. High inventory turnover means products are selling quickly and cash is not sitting on shelves. Low turnover signals overbuying, slow-moving SKUs, or demand forecasting problems.

Measure inventory turnover at the SKU level, not just overall. Your top sellers might turn over 12 times a year while your slow movers sit for 6+ months. The blended number hides both the winners and the dead stock that is eating your working capital.

The total cost to pick, pack, and ship one order, including warehouse labor, packaging materials, shipping carrier fees, and 3PL charges. Fulfillment cost per order directly erodes contribution margin and scales with volume — unlike software costs, it does not get cheaper with scale.

Fulfillment costs often increase as brands grow, contrary to expectations. Higher order volumes mean more warehouse space, more staff, and higher carrier rates once you exceed certain volume tiers. Negotiate shipping rates aggressively and benchmark fulfillment cost as a percentage of AOV.

The revenue level at which total costs equal total revenue — no profit, no loss. For e-commerce brands, the break-even point factors in fixed costs (rent, salaries, software) divided by contribution margin per order. Knowing this number tells you exactly how many orders you need each month.

Calculate break-even at the monthly level: total fixed costs divided by average contribution margin per order equals the number of orders needed to break even. If your fixed costs are $30K/month and your contribution margin per order is $20, you need 1,500 orders just to cover costs.