Break-Even ROAS Calculator
Find the minimum ROAS needed to avoid losses.
OpenDropshipping & Ecommerce Glossary
Learn the essential terminology used in dropshipping and ecommerce. This glossary covers advertising metrics, financial calculations, and business concepts that every online seller should understand.
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A
- Ad Spend
- The total amount of money spent on advertising campaigns during a specific period. Tracking ad spend is essential for calculating profitability metrics like ROAS and ROI. Calculate your ad ROI →
- AOV (Average Order Value)
- The average total value of orders placed by customers, calculated by dividing total revenue by number of orders. Higher AOV typically improves profitability since fixed costs are spread across larger purchases.
- ATC (Add to Cart)
- A key ecommerce metric tracking when visitors add products to their shopping cart. ATC rate helps measure product page effectiveness and purchase intent.
B
- Break-Even ROAS
- The minimum return on ad spend needed to avoid losing money on advertising. Calculated by dividing 1 by profit margin percentage. For example, a 25% margin requires a break-even ROAS of 4.0 (1 ÷ 0.25). Calculate yours →
- Bundle
- A product grouping that combines multiple items sold together at a combined price. Bundles can increase AOV and perceived value while differentiating from competitors.
C
- CAC (Customer Acquisition Cost)
- The total cost to acquire a new customer, including marketing, advertising, and sales expenses. Often used interchangeably with CPA but can include broader costs.
- COGS (Cost of Goods Sold)
- The direct costs attributable to producing or purchasing products sold, including product cost, shipping to warehouse, and handling. COGS is subtracted from revenue to calculate gross profit.
- Conversion Rate
- The percentage of visitors who complete a desired action, typically making a purchase. Calculated as (conversions ÷ visitors) × 100. Industry averages for ecommerce range from 1-4%. Calculate yours →
- CPA (Cost Per Acquisition)
- The cost to acquire one customer or conversion through advertising. Calculated by dividing total ad spend by number of conversions. Lower CPA relative to profit margin indicates more efficient advertising. Calculate target CPA →
- CPC (Cost Per Click)
- The price paid for each click on a pay-per-click advertisement. CPC combined with conversion rate determines your effective CPA.
- CPM (Cost Per Mille)
- The cost to show an ad 1,000 times (mille = thousand). Used in display and social advertising where impressions are the billing metric rather than clicks.
- CTR (Click-Through Rate)
- The percentage of people who click on an ad after seeing it. Calculated as (clicks ÷ impressions) × 100. Higher CTR typically indicates more relevant or compelling ad creative.
D
- Dropshipping
- A retail fulfillment method where the store doesn't keep products in stock. Instead, when a store sells a product, it purchases the item from a third-party supplier who ships directly to the customer.
- DSR (Detailed Seller Ratings)
- Performance metrics used by platforms like eBay to rate seller quality on criteria like item accuracy, communication, shipping time, and shipping costs.
F
- Fulfillment
- The complete process of receiving, processing, and delivering orders to customers. In dropshipping, fulfillment is handled by the supplier rather than the seller.
- Fulfillment Time
- The time between order placement and shipment. Faster fulfillment improves customer satisfaction and can reduce refund requests and chargebacks.
G
- Gross Margin
- The percentage of revenue remaining after subtracting cost of goods sold. Calculated as ((revenue − COGS) ÷ revenue) × 100. Does not include operating expenses like advertising or platform fees. Calculate yours →
- Gross Profit
- Revenue minus cost of goods sold. Represents profit before operating expenses. Calculated as: Revenue − COGS = Gross Profit.
L
- Landing Page
- A standalone web page created specifically for a marketing or advertising campaign. In ecommerce, often used to showcase a single product or offer with minimal distractions.
- LTV (Lifetime Value)
- The total revenue or profit expected from a customer over the entire business relationship. Calculated as AOV × purchase frequency × customer lifespan. Also called CLV (Customer Lifetime Value). Calculate yours →
- LTV:CAC Ratio
- The ratio of customer lifetime value to acquisition cost. A healthy ratio is typically 3:1 or higher, meaning customers generate at least 3× what it cost to acquire them.
M
- Markup
- The amount added to the cost price to determine selling price, usually expressed as a percentage. Markup of 100% on a $10 cost = $20 selling price. Different from margin.
- MER (Marketing Efficiency Ratio)
- Total revenue divided by total marketing spend. Similar to blended ROAS but includes all marketing costs, not just paid advertising. Higher MER indicates more efficient overall marketing.
- MOQ (Minimum Order Quantity)
- The smallest quantity a supplier will sell for a single order. In dropshipping, suppliers with no MOQ or MOQ of 1 are preferred since you order as customers purchase.
N
- Net Margin
- The percentage of revenue remaining after all expenses including COGS, advertising, platform fees, and operating costs. Represents true profitability. Calculated as (net profit ÷ revenue) × 100. Calculate yours →
- Net Profit
- Revenue minus all expenses. The actual profit remaining after paying for products, shipping, ads, fees, and operations. Also called bottom line or take-home profit.
- Niche
- A specialized segment of the market focused on a specific product category, customer need, or interest area. Niche stores often have less competition and more targeted customers.
O
- Order Value
- The total value of a single customer order. Same as transaction value. Higher order values improve unit economics by spreading fixed costs.
P
- Payment Gateway
- A service that processes credit card and digital payments for online transactions. Examples include Stripe, PayPal, and Shopify Payments. Gateways typically charge percentage plus fixed fees per transaction.
- Platform Fees
- Fees charged by ecommerce platforms for using their services. Includes monthly subscriptions, transaction fees, and payment processing. Must be factored into pricing calculations. Estimate Shopify fees →
- POD (Print on Demand)
- A fulfillment model where products are printed or created only when ordered. Used for custom apparel, accessories, and merchandise without holding inventory.
- Profit Margin
- The percentage of selling price that becomes profit. Can refer to gross margin (before operating costs) or net margin (after all expenses). Critical for determining sustainable pricing. Calculate yours →
R
- Refund Rate
- The percentage of orders that are refunded. High refund rates hurt profitability and can indicate product quality or expectation issues. Should be factored into margin calculations.
- Retargeting
- Advertising strategy that targets users who previously visited your website or engaged with your content. Often has higher conversion rates since the audience already showed interest.
- ROAS (Return on Ad Spend)
- Revenue generated per dollar spent on advertising. Calculated as revenue ÷ ad spend. A ROAS of 4.0 means $4 revenue for every $1 spent on ads. Calculate break-even ROAS →
- ROI (Return on Investment)
- The percentage return relative to investment. Calculated as ((gain − cost) ÷ cost) × 100. Unlike ROAS which uses revenue, ROI uses profit to measure true returns. Calculate ad ROI →
S
- SKU (Stock Keeping Unit)
- A unique identifier assigned to each product variant for inventory management and tracking. Each combination of size, color, or other attributes typically has its own SKU.
- Supplier
- The company that provides products for your store. In dropshipping, the supplier also handles storage and shipping directly to your customers.
T
- Target CPA
- The maximum cost per acquisition you can afford while remaining profitable. Calculated based on your profit margin and acceptable ad cost percentage. Used to set campaign bidding strategies. Calculate yours →
- Transaction Fee
- A fee charged per sale by platforms or payment processors. Usually a percentage plus fixed amount. Example: 2.9% + $0.30 per transaction. Estimate Shopify fees →
U
- Upsell
- A sales technique offering customers a higher-end or more expensive version of what they're buying. Increases AOV without additional customer acquisition costs.
V
- VAT (Value Added Tax)
- A consumption tax placed on products at each stage of production. In ecommerce, VAT is often included in the displayed price (VAT-inclusive) or added at checkout. Rates vary by country. Calculate VAT →
Last updated: February 2026