How this calculation works
Build a realistic contribution estimate by following what happens to every dispatched order. Retained sales earn revenue; customer returns and RTO earn none but can still incur shipping, ads and handling. Recoverable stock is kept as inventory value. The result separates collected sales tax from revenue and makes every fee an editable assumption.
Worked example
This example uses illustrative inputs. Your current result is shown above.
At ₹1,000 before tax, product cost ₹400, packaging ₹20, shipping ₹60, fees of 10% + 2%, fixed fee ₹10, ads ₹100, returns 10%, RTO 5%, extra costs ₹80/return and ₹60/RTO, and no stock loss: 85% of sales are retained. Revenue is ₹850, expected total cost ₹643, profit ₹207, net margin 24.35%, break-even price ₹723.26 and break-even ROAS 2.77×.
Assumptions and limits
- The unit is one dispatched order containing one item. Return and RTO percentages are mutually exclusive shares of all dispatched orders; neither is a percentage of delivered orders.
- Failed orders produce zero retained revenue. The full refund is already reflected by excluding that revenue and must not also be added as a cost.
- Packaging, outbound shipping, fixed fees and ads apply to every dispatched order. Percentage fees apply only to retained orders on the selected net or gross price.
- Returned stock is recovered except for the stated stock-loss share. The product cost is charged once for retained items and the unrecoverable share of failed items.
- Every entered cost and fee should exclude recoverable tax and include unrecoverable tax. Sales tax on failed orders is assumed reversed in full. The sales tax rate only separates sales tax from revenue; tax credits, remittance timing and income tax are not modelled.
- Break-even price holds costs, percentages and demand constant. Fixed business overhead, salaries and financing costs are excluded, so this is contribution per order rather than statutory accounting profit.
Questions people ask
Are the marketplace fees current Amazon, Flipkart or Meesho rates?
No. Both percentage fees and the fixed fee are manually entered assumptions. Use your settlement statements and current agreement, including any tax you cannot recover. No marketplace rate table or live API is used.
How do I enter my return and RTO rates?
Divide customer-return orders by all dispatched orders, and separately divide RTO orders by the same dispatched-order count. An order belongs to only one group. If 100 orders are dispatched, 10 are customer returns and 5 are RTO, enter 10% and 5%; 85 orders retain revenue.
Should I add the full refund to return costs?
No. Failed orders already earn zero revenue. Enter only additional reverse shipping, handling and fees not recovered on that failed order. Outbound shipping and packaging are already charged on every dispatch, while stock loss has its own input.
Is this margin the same as markup?
No. Net margin divides expected profit by expected retained sales revenue excluding tax. Markup divides a profit or price uplift by cost. The denominators differ, so their percentages are not interchangeable.
Why can break-even ROAS appear when ad spend is zero?
The threshold is the net retained revenue divided by contribution before ads. It describes the ROAS needed if you advertise at this price and cost structure. Current ROAS is not applicable at zero ad spend. If contribution before ads is zero or negative, there is no positive advertising budget that breaks even.