Gross sales and order value include GST or sales tax, which is not yours, and orders that will be refunded or never delivered. Net revenue removes them, so it is the right starting point for margins.
In India, prices usually include GST, so net revenue is noticeably lower than order value. Comparing margin across markets without adjusting for this is a common mistake.
Formula
Net revenue = Order value − Discounts − Refunds and returns − Tax
Example
₹12,00,000 of orders including 18% GST, with ₹40,000 refunded, is about ₹9,83,000 of net revenue.
CM1, CM2, CM3 and EBITDA per order and per month, with RTO, COD, channel comparison and a board-ready report.
Related terms
- GMV (gross merchandise value)GMV is the value of the units sold in a period at their MRP (list price), before…
- Refund rateRefund rate is the share of delivered orders, or of revenue, that is refunded to…
- Contribution margin (CM1, CM2, CM3)Contribution margin is the revenue left from a sale after the variable costs of…
Where this comes up
How to calculate contribution margin for a Shopify storeA step-by-step guide to CM1, CM2 and CM3 for D2C brands: what goes in each layer, the costs most brands miss, and how to turn it into a daily number. Is your best seller losing money? How to measure product profitabilityRevenue rankings hide the products that lose money. How to build a product P&L that shares shipping, fees, discounts and RTO fairly, and what to do with the gaps it finds. ROAS is not a business metricReturn on ad spend tells you how the platform sees your campaigns. Contribution margin tells you whether the business is better off. Here is how to run paid media on the second.Part of the growth marketing glossary by Shiva Sharma.