Regardless of whether you are just setting up your own e-store or have been running it for several years, one of its most important goals is to make money. If the profitability of your online store is not impressive despite the investment, it is worth finding out:
- what elements should be included in your calculations and estimates,
- how to run a store so that the whole venture generates income, not just revenue,
- how to calculate the profitability of an online store.
Read on!
Is running a store worth it? How to achieve online store profitability?
Although much is said about the fact that in recent years (including 2026) the e-commerce industry is experiencing a powerful boom, what will ultimately matter to you is whether your business is doing well and whether you are able to make money from an online store. To check this, it is necessary to analyze profitability parameters, regularly monitor them and compare the results achieved with those from a month ago, half a year ago, or even an earlier period.
Do not be discouraged when the profitability of your online store in the first months of operation is far from what you assumed – remember, however, to plan your activities appropriately. Do not expect enormous profits from the start – the first phase of a store’s operation is a time for smart investment and hard work.
How much does it cost to set up an online store?
Although the entry threshold into the e-commerce industry is historically low, this does not mean that running an online store can be done without costs. To estimate how much you need to spend to launch a store, take into account the costs of the platform on which you will “build” your store. Add to this the costs of hosting and a domain, sales commission costs, employee salary costs (as well as the hiring process itself), and storage, packaging, and shipping costs.
Online store assumptions – what to expect?
Key in the context of e-commerce profitability is the BEP (Break-Even Point), i.e. the profitability threshold. This is the moment at which revenue from product sales covers all fixed and variable costs incurred by your company. In other words: this is when you break even, meaning you finally stop losing money. To prepare well for running an online store, you need to know how many products to sell per month in order to reach the BEP.
When creating assumptions for your store, be sure to take into account what costs it will generate (or already generates) per month and how much you need to sell in order to start making money.
Remember that the break-even point of an online store will be in a different place every month.
How to determine the break-even point in your own online store?
This should be done by taking into account all inflows to the store (these consist of payments made by customers, regardless of the form: by card, cash, or bank transfer). Every month, the inflows to the store will be different.
However, this is not all – knowledge is also required about how much it costs to run an online store. These costs can, of course, vary depending on what you sell, the scale at which you operate, what logistics model you use, and so on.
Costs are divided into fixed and variable – you are able to determine the amount of fixed costs because you incur them every month.
Online store operating costs: fixed and variable
Fixed costs include, among others:
- paid subscriptions (e.g. for software),
- hosting,
- insurance,
- rent,
- marketing and advertising,
- supplier contracts,
- accounting,
- employment.
Variable costs include, among others:
- goods storage (the more, the higher the cost),
- packaging,
- shipping,
- man-hours (particularly noticeable during peak sales periods),
- sales commissions,
- advertising costs.
How often should the break-even point be verified?
Checking the break-even point should be done at least several times a year. The level of costs (even fixed ones) changes. The level of sales varies depending on the period, which is particularly visible in stores selling seasonally popular products.
Other profitability indicators for an online store
The profitability of an online store is, however, much more than just the break-even point. Other profitability indicators worth paying attention to include:
- return on assets
- return on sales
- return on investment
- return on ad spend
- customer acquisition cost
- customer lifetime value
We will now discuss these in more detail.
Return on assets (ROA)
ROA indicates the ability of a company’s assets to generate profits. In other words: it allows you to determine how efficiently a company manages its assets. To calculate ROA, the financial result should be divided by total assets, and the result multiplied by 100.
A high ROA (expressed as a percentage) indicates good financial health of the company. How, however, can you determine when ROA is high and when it is too low? The calculations should be performed regularly and the results compared with previous ones. In this way, after just a few months, we will be able to identify a trend.
Return on sales (ROS)
Having access to the profit and loss statement, you are able to check how profitable sales are in your online store. It is enough to take into account the net financial result for a given period and then divide it by sales revenue. The result obtained is multiplied by 100, giving us the percentage value of ROS.
This is another indicator that cannot function in a vacuum – the return on sales result should be regularly compared and conclusions drawn on this basis regarding the financial health of the company.
Return on investment (ROI)
Although the name might suggest otherwise, ROI is not an indicator reserved for large investments. In theory, ROI can be used for almost any business expense – there is, however, one condition. This indicator applies only when we are able to determine the revenue generated by a given investment.
Return on advertising spend (ROAS)
A large portion of the costs incurred by online stores consists of advertising expenditure. This is hardly surprising – the Polish e-commerce market, although still growing, is also saturated. It therefore requires – colloquially speaking – breaking through thousands of other stores, special offers, and customer service terms. This cannot be achieved without investing in advertising. For it to make sense in the long term, however, the ROAS parameter should be regularly verified.
Meta Ads, Google Ads, and many other advertising platforms fortunately allow entrepreneurs to view the results of their running advertising campaigns. This makes it relatively easy to check whether the money spent on advertising is paying off.
Thanks to ROAS, you will not only be able to check whether advertising expenditure has paid off, but also compare different advertising channels and assess which are the most profitable. All of this will help you make better decisions regarding advertising.
ROAS is calculated by dividing advertising revenue by the amount you invested in it.
Customer acquisition cost in e-commerce (CAC)
It is hard to talk about business profitability without taking into account the customer acquisition cost. Although the formula for CAC is straightforward (customer acquisition expenditure divided by the number of customers acquired), applying it in practice presents a certain challenge.
The cost of customer acquisition is usually referred to as marketing costs – after all, ads are directed mainly at new customers. Remarketing activities, which target customers who have already made purchases in your store in the past, can theoretically be excluded from this equation. However, this is just one approach. You can equally well consider that remarketing is also acquiring (or re-acquiring) customers and include these costs in the CAC calculation.
Most commonly, however, the following should be taken into account in this context:
- advertising campaign costs,
- sales activity costs,
- salary costs for employees involved in the customer acquisition process.
Depending on the adopted research methodology, the industry in which you operate, and the expected customer LTV (which we will discuss further in the next point), the desired CAC results can vary greatly. The general rule is simple, however: the lower the CAC, the better. How to reduce it?
- By applying content marketing and SEO activities.
- By running social media activities – beyond paid campaigns.
- By carrying out UX activities aimed at optimizing the store page, product cards, etc.
- By continuously analyzing data.
- By segmenting customers.
Each of the above points also generates costs, but a well-thought-out strategy incorporating these techniques means that, in the broader perspective, you can expect lower customer acquisition costs.
Customer lifetime value (LTV)
Even the lowest customer acquisition costs will not give your store as much as customers with a high lifetime value. This parameter indicates the amount a customer will spend in your store – not during a one-time purchase or even over the course of a year, but throughout the entire period of contact with the store.
It is impossible to calculate LTV definitively – after all, we have no insight into the future. Instead, you can try to estimate this value using specific data.
The LTV formula requires knowledge of three parameters. These are:
- Average sales value – refers to the average amount of a single purchase.
- Average transaction frequency – indicates how many purchases a customer makes in a given period.
- Retention period – takes into account the period during which the customer is active in contact with the brand (makes purchases).
Once you know the values for the given assumptions, multiply them in sequence to obtain the LTV – customer lifetime value.
Example 1:
If the average order value in an electronics store is 700 PLN, and a customer makes approximately 2 purchases per year, remaining loyal to the brand for approximately 3 years, the LTV parameter is 700 * 2 * 3 = 4,200 PLN.
Example 2:
The average order value in a hobby store is 45 PLN, but customers typically make purchases 7 times within 12 months. The average customer loyalty period is 18 months (1.5 years). In this case, LTV is 45 * 7 * 1.5, which equals 472.50 PLN.
A potential problem in the context of LTV can be any of the three components. You can try to increase the average sales value by using cross-selling, up-selling, or both techniques at once.
You can influence transaction frequency by creating loyalty programs, but also by performing detailed customer segmentation or offering a wishlist feature in the store. The retention period, in turn, can be extended primarily by focusing on building a community – with long-term relationships in mind. Do not forget to regularly check how your brand is performing in terms of organic reach. Even the largest amounts of money invested in marketing will not achieve much if the published content is uninteresting to customers. The content you publish must be effective, and its effectiveness is best measured by organic reach.
How to interpret selected parameters?
Although in theory you do not need to track every parameter on the list, knowledge of their values can prove very useful for your company. The more data you process and analyze, the more complete knowledge of your e-store’s profitability you will have.
Here is how – in a nutshell – to interpret the results obtained:
ROA – the higher the indicator, the more effectively you are using your assets. Try to keep this parameter as high as possible. High ROA = high ability of the company to generate profits.
ROS – in this case, you should also aim for the highest possible result. High ROS means that you are able to convert a large percentage of revenue into income.
ROI – every investment should bring a return – so try to achieve high ROI in relation to each investment. Remember, however, that some of them will yield results even after many months, which is why it is so important to regularly check the values of selected indicators.
ROAS – advertising expenditure is constantly rising – this results from growing competition, but also from the fact that advertisers themselves are raising prices. Try to keep advertising costs under control. The ROAS parameter should be as high as possible to justify further advertising expenditure.
CAC – the lower the customer acquisition cost, the better. Low CAC means that you are effectively using marketing and sales techniques, and customers are happy to come to your store. However, an optimal CAC once achieved is not guaranteed forever – it should be carefully monitored to see how it changes, in order to react quickly enough should an “increase” occur.
LTV – each of the three parameters operating under LTV should be as high as possible. Monitor simultaneously the average order value, transaction frequency, and retention period to ensure your company has loyal customers who are willing to spend significant amounts.
Summary: how much does an online store earn?
The answer to this question will vary depending on many factors. Your task is to track them and respond to changes occurring in the industry, customer preferences, and the market itself.
By continuously monitoring profitability indicators, you will gain certainty about the direction in which your company is heading and will be able to, with adequate advance notice:
- Plan future investments, making use of projected surpluses.
- Implement corrective measures when necessary.
- Reduce costs and scale back the company’s activities sufficiently in advance.
- As a last resort, close the business before losses prove impossible to recover.
Good luck!
