How to use the Shopify Profit
- Enter average order value and monthly order count.
- Enter cost of goods and fulfilment shipping cost.
- Add payment fees, subscription and app costs.
- Enter monthly ad spend and refund rate to see net profit.
How the calculation works
Per-order contribution = AOV − COGS − shipping − payment fees. Shopify Payments takes roughly 2.9% plus 30 cents on standard plans, with an extra 0.5–2% charged if you use an external gateway. Monthly fixed costs — plan fee plus apps, which routinely reach 200–500 for a growing store — are subtracted from total contribution, not per order.
Two lines dominate profitability. Advertising is measured by MER, total revenue ÷ total ad spend, and a store needs MER above roughly 3 to survive typical 30–40% gross margins. Returns and chargebacks strip 2–10% of revenue depending on category, and each chargeback adds a fixed fee on top of the lost goods. Repeat purchase rate is the lever that changes the model: if 30% of customers order again, effective CAC falls by nearly a third and marginal margins improve accordingly.
Net = orders × (AOV − COGS − shipping − fees) − fixed costs − ad spend − refundsSource: Shopify Payments fee structure and standard direct-to-consumer unit economics.
Worked example
620 orders at 64 AOV, COGS 21, shipping 6.10, 2.9% + 0.30 fees, 340 in plan and apps, 9,800 ad spend, 4% refunds.
- Payment fee per order = 64 × 0.029 + 0.30 = 2.16.
- Contribution per order = 64 − 21 − 6.10 − 2.16 = 34.74.
- Total contribution = 620 × 34.74 = 21,539.
- Less 340 fixed, 9,800 ads and 1,587 refunds = 9,812.
About 9,812 net on 39,680 of revenue — 24.7% net margin at an MER of 4.05.
Frequently asked questions
What is MER and what should it be?+
Marketing efficiency ratio: revenue ÷ ad spend. Most stores need above 3 to be profitable at typical margins.
Why do app costs matter so much?+
They are fixed monthly charges that quietly reach several hundred, hitting small stores hardest.
Should I use an external payment gateway?+
Only if the saving exceeds Shopify's additional transaction fee for not using Shopify Payments.
How do I improve margin fastest?+
Raise AOV through bundling and increase repeat purchase rate — both dilute customer acquisition cost.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.