What's a good ROAS for an ecommerce brand?
By Dan BartleyUpdated 3 minute read
The short answer
A good ROAS is one above your breakeven, and breakeven comes from your margin, not an industry average. Divide 1 by the share of each sale left after product cost, freight, payment fees and GST: keep 50 cents in the dollar and you break even at a ROAS of 2. A good target sits far enough above that to pay for overheads and leave profit.
How do I work out my breakeven ROAS?
Divide 1 by your contribution margin: the share of each sale left after product cost, freight, payment fees and GST, before any ad spend. Below that ROAS every sale from ads loses money; above it, ads start paying for overheads and profit.
| Margin left after costs | Breakeven ROAS | Sales needed per $100 of ad spend |
|---|---|---|
| 70% | 1.43 | $143 |
| 60% | 1.67 | $167 |
| 50% | 2.00 | $200 |
| 40% | 2.50 | $250 |
| 30% | 3.33 | $333 |
Does GST change my ROAS?
Yes, if your revenue figure includes it. GST is 10% in Australia and 15% in New Zealand, so a ROAS worked out on GST-inclusive sales looks better than the money you keep.
Put margin and ROAS on the same basis, both excluding GST. If your sales figure includes GST, divide it by 1.1 in Australia, or 1.15 in New Zealand, before comparing ROAS with breakeven.
What ROAS should my store aim for?
Enough above breakeven to cover overheads and leave profit, which depends on your fixed costs and how fast you want to grow. A brand pushing for growth may run close to breakeven on first orders and earn its profit on repeat customers; a brand that needs cash now needs a wider gap.
To turn a profit goal into a ROAS target, subtract the share of each sale you want to keep from your margin, then divide 1 by what is left. At a 50% margin, keeping 15 cents in each dollar after ads gives 1 divided by 0.35, a target ROAS of about 2.86.
Set the target per product range if margins differ widely. One store-wide number lets high-margin products carry low-margin ones without anyone noticing.
Should repeat customers count towards ROAS?
Yes, but track them separately. A first order at breakeven can be a good result if customers come back, so look at what a new customer is worth over a year alongside the ROAS of each campaign.
Returning buyers also flatter platform ROAS, because they would often have bought anyway. Where you can, compare the cost of a new customer with what that customer spends over time.
Why do bulky products need a higher ROAS?
Because freight comes out of the margin before ads are paid for. A sofa or a rug sent across Australia can lose a large share of its margin to delivery, which raises the breakeven ROAS even when the markup looks healthy.
Free shipping offers and returns work the same way. Count the delivery you pay for and the average cost of returns in the margin before you divide, or the breakeven figure will be too low.
Which ROAS figure should I trust?
Use Meta's ROAS to compare ads with each other and your store's numbers to judge the business. Meta credits sales inside its attribution windows, Shopify credits them its own way, and neither sees everything, so blended ROAS (total sales divided by total ad spend, often called MER) is the closest measure of what the ads earned the business.
There is more on reconciling them in platform ROAS, blended ROAS and MER.
Other questions people ask about this
Is a ROAS of 3 good?
It is profitable if more than about 33% of each sale is left after costs, because that is where a ROAS of 3 breaks even. Below that margin, a ROAS of 3 loses money on every sale.
Why is my ROAS different in Meta and Shopify?
They count sales differently: Meta credits sales within its click and view windows, while Shopify uses its own attribution based on visits. Expect them to differ, and judge the trend in each.
Read the full answerShould I target ROAS or cost per purchase?
Use ROAS when order values vary widely and cost per purchase when most orders are a similar size. Both come from the same margin maths: your breakeven cost per purchase is your average order value, excluding GST, multiplied by your margin.
Should ROAS be the main goal?
Profit should be. ROAS is a ratio, so it can rise while total profit falls, for example when budgets are cut back to only the likeliest buyers.
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