Your Shopify Dashboard Is Lying To You About Profit

Shopify's home screen shows total sales. It is a real number and it is honestly reported.

It is also the number furthest from your bank account, and it is the one every store owner quotes when asked how the business is doing.

Here is the whole subtraction, done properly, on one order. Follow it with your own figures and you will know more about your business in ten minutes than the dashboard has told you all year.

The order

A customer buys a $100 product. They pay $5 for delivery. They used a 10% code.

Your dashboard is going to celebrate. Let's do the actual arithmetic.

Collected: $95. 100 minus the $10 discount, plus the $5 of delivery they paid.

Straight away there is a decision most stores get wrong, so let's deal with it now.

The delivery trap

The customer paid you $5 for delivery. The carrier charged you 7.

Most reporting counts the 5 as revenue and never goes looking for the 7. Delivery quietly becomes a source of income when it is actually costing you $2 an order.

This is one of the easiest mistakes in ecommerce reporting to make twice. Two spreadsheets written months apart will happily disagree by exactly the delivery the customer paid — one counting it as revenue, one not — and both look completely reasonable on their own. Nobody notices until the two are put side by side.

If you take one thing from this article: delivery is two numbers, not one. What they paid you and what it cost you. They are rarely the same and the gap is almost always the wrong way round.

Now the subtraction

From your $95:

• Cost of the product: $28. What you paid your supplier, landed. Not the invoice price — the invoice plus freight in, plus duty, plus whatever the customs broker charged. Most stores use the invoice price and understate this by 10 to 25%.
• Delivery you actually paid: $7. The carrier's bill, including the fuel surcharge and the residential surcharge you forgot about.
• Payment processing: about $2. Call it 1.9% plus a fixed 25 cents. Higher if the customer is international, higher again on some wallets.
• Pick, pack and the box: $1.50. Somebody's time and some cardboard. If you do it yourself it still costs, it is just paid in evenings.

That leaves $56.50.

This number has a name worth learning: contribution margin. It is what one more order contributes before any of your fixed costs. It is the single most useful number in ecommerce and almost nobody can tell you theirs.

Then the two big ones

Advertising. If it costs you $35 to acquire that customer, you are at 21.50.

Note what just happened. Your ad cost ate 62% of everything the order contributed, and your dashboard never mentioned it, because Shopify does not know what you spend on Meta.

Refunds. If 8% of your orders come back, then across a hundred orders like this one, eight of them reverse. You refund the 95, you have already paid the processing fee, you have paid delivery out and possibly back, and you may not be able to resell the item.

Spread across the hundred, that is roughly another $7 to $$8 gone from each.

You are at somewhere near $14.

Fourteen, not ninety-five

Your dashboard said 95. You kept about 14, before you have paid for a single app subscription, any software, any wages, or yourself.

That is not a disaster. A 15% contribution after advertising is a working business. The disaster is not knowing, because everything you decide next depends on which of those two numbers is in your head.

At 95, a 20% off sale sounds like a promotion.

At 14, a 20% off sale is you paying customers to take your stock, and it takes about four seconds of arithmetic to see it once you have the right starting number. Nineteen of your $95 is more than everything you were keeping.

That is how stores run a "successful" campaign, hit record revenue, and end the month with less money than they started with. Every number they looked at went up.

What Shopify does and doesn't do

To be fair to it, because this gets overstated.

Shopify does hold a cost per item, and if you fill it in you get a rough margin figure. Genuinely useful. Do fill it in.

What it does not do:

• Know what you spend on advertising
• Know what the carrier charged you, as opposed to what you charged the customer
• Handle a product whose cost changed between the shipment you bought in March and the one in September
• Understand a bundle, where the cost is the things inside the box rather than the box
• Put a refund back on the day the order happened, instead of the day the money left
• Include your payment processing fees in a margin figure

None of those are Shopify failing. It is a shop, not an accountant. The mistake is treating a shop's summary screen as a profit report.

Do this today

Take your last full month. Six lines on paper.

1. Total collected, from Shopify.
2. Minus refunds for that month.
3. Minus the landed cost of everything that sold. Landed, not invoiced.
4. Minus what carriers actually charged you.
5. Minus payment processing, from your processor's statement rather than an estimate.
6. Minus every dollar of advertising, from the platforms rather than from memory.

What is left is what the month really made before fixed costs.

Then divide it by your order count. That is what one order is worth to you, and it is the number that should decide your ad budget, your free-shipping threshold, your discount policy and whether that new product is worth stocking.

Most people find it is between a third and a half of what they assumed. A few find it is negative on their best-selling product, which is a rough afternoon and the most valuable thing they learn all year.

Aplon does this subtraction on every order automatically — landed costs, real carrier charges, processing fees, ad spend and refunds. [See your real margin](/).