Net Revenue
Gross sales minus returns, cancellations, and discounts. Net Revenue = Gross Revenue - Returns - Cancellations - Discounts. What's left after deductions.
In practice
Net revenue is 'the truth.' Gross revenue looks great in a report — but with 20% returns, 5% cancellations, and 10% discounts, net revenue is just 65% of gross. Every business decision should be based on net, not gross.
Common misconception
'$300K in sales — we hit our goal!' Not if 25% is returns. Net revenue is $225K. Always define what counts as success — gross revenue is a poor retail KPI on its own.
How to fix it
Net revenue much lower than gross? (1) Analyze the return rate — above 15% signals a product/description issue, (2) analyze the cancellation rate — above 3% signals a delivery-time issue, (3) analyze discount depth — average discounts above 20% signal a pricing-strategy problem.
Example
A fashion store: gross $120K, net $83K (69%). Analysis: returns 18%, discounts 13%. Fixing size guides cut returns to 11%. Ending blanket discounts raised the net/gross ratio to 81%.
Priority
Set net revenue as your primary KPI, not gross. Check the net/gross ratio monthly. Below 75% is a red flag. Above 85% is healthy. A dashboard showing gross alone is misleading.
Related terms
Keep learning. Metrics that touch the same area:
- Return RateOperationsThe percentage of orders that get returned. Return Rate = returns / orders × 100. Averages: apparel 20-30%, electronics 8-15%, books 5%. Above benchmark signals a problem worth investigating.
- Gross MarginFinance(Sale price - COGS) / sale price × 100. The basis for every pricing and advertising decision.
- ROI – Return on InvestmentFinanceA general profitability metric: (net profit / investment cost) × 100. Different from ROAS — it includes all expenses.
- AOV – Average Order ValueFinanceTotal revenue divided by number of orders. The biggest lever for increasing revenue without more advertising.
- LTV / CLV – Customer Lifetime ValueFinanceTotal expected profit from a customer over the entire relationship. A healthy LTV:CAC ratio is 3:1.
- COGS – Cost of Goods SoldFinanceThe direct cost of producing or acquiring products sold. Includes: product + import shipping + customs + packaging.
Jimmy tracks your Net Revenue, automatically
WhatsApp alerts when something important changes. No dashboards, no hassle.