ROMI in E-commerce: Your Profit Radar

ROMI in e-commerce: your profit radar

Guide and checklist from a CFO with examples, benchmarks, and a growth plan

About expertHUB

At expertHUB we build financial models for e-commerce so that every marketing channel brings profit, not just traffic.
We are a team of remote CFOs for online stores. We connect finance, marketing, and inventory into one clear report, so you always know:

• where your money is right now,
• what is slowing down your growth,
• and how to fix it.

We work with companies from €250K turnover to multi-million brands. For small stores we start with diagnostics and ROMI analysis, for big ones we create a full growth strategy with integration of all data into one system.

💡 Our mission is to turn numbers into clear actions that bring profit.

---

Why ROMI is critical for e-commerce

ROMI (Return on Marketing Investment) is a key metric that shows how much profit each euro spent on marketing brings.

If you do not calculate ROMI:

• it is easy to spend money on channels that “look” profitable but actually lose money;
• decisions are made on “feelings” instead of facts;
• cash gaps appear because money is frozen in products that sell poorly;
• marketing, warehouse, and purchasing work separately, without one system.

If you do calculate ROMI:

• you see which channels really earn and which waste money;
• you can quickly move budgets to profitable sources;
• it is easy to align decisions with your team and partners — numbers do not argue;
• you can manage growth with less risk.

⚠️ In our cases, e-commerce with €1M turnover and ROMI below 20% loses €12,000–50,000 every month only because budgets work in the red.

Ask yourself:

• Do you know the ROMI of each of your channels for the last month?
• Can you say how much every new client brings in 6 months?
• If you stop ads today, do you have enough cash flow for 3 months?

⬇️ Download ROMI calculator spreadsheet

---

Glossary of terms and formulas with explanations

Term	What it is	Formula	Why it matters	Explanation
ROMI	Marketing profitability	(Gross Profit – Marketing) ÷ Marketing × 100%	Shows if you earn on ads	ROMI = 50% → every €1 of ads gives €1.5 profit. ROMI < 0% — ads are loss.
CAC	Customer Acquisition Cost	Marketing ÷ New clients	If CAC > margin → loss	If CAC = €20 and margin = €15, you lose €5 per sale.
MER	Marketing Efficiency Ratio	Revenue ÷ Marketing	High MER = sales are efficient	MER = 5 → every €1 ads gives €5 revenue.
AOV	Average Order Value	Revenue ÷ Orders	Higher AOV → you can spend more on CAC	If AOV grows from €50 to €75, you can invest more in clients.
COGS	Cost of Goods Sold	All direct costs	Direct impact on margin	If COGS = 60%, only 40% left for marketing and profit.
LTV	Lifetime Value	AOV × Avg. purchases	Lets you invest more in long-term clients	If avg. client spends €100 × 3 = €300 LTV, you can pay more at first.

---

How to use the ROMI calculation sheet

1. Enter the basic parameters in the “Settings” sheet: margin, target ROMI and CAC.
2. Fill in the exchange rates in the “FX” sheet (if you work in different currencies).
3. Enter campaign data in the “Campaigns” sheet: spend, revenue, orders, COGS.
4. The sheet will automatically calculate ROMI, CAC, MER, LTV, Gross Profit and Payback.
5. Compare with the goals and benchmarks below.

How to read the table and what to do

• ROMI green → the campaign generates profit above the target.
  Action: you can scale, but make sure CAC does not grow faster than AOV or LTV.
• ROMI yellow → there is profit, but below the desired level. Possible reasons:
  • Too high CAC — ads are expensive, the website or the offer converts poorly.
    Solution: test new creatives, improve the landing page, adjust targeting.
  • Low AOV — the client buys little.
    Solution: add upsells/cross-sells, free shipping from a certain order value.
  • High COGS — the margin is low due to purchase price or logistics.
    Solution: review suppliers, optimize the warehouse.
• ROMI red → the campaign is unprofitable. Possible reasons:
  • Low conversion rate (CVR) — the website does not sell.
    Solution: carry out a UX audit, improve page structure, speed up loading.
  • Wrong channel or audience — ads are shown to the wrong people.
    Solution: change segments, analyze segmentation data of orders.
  • Promotions cut the margin — discounts “eat up” profit.
    Solution: introduce promotions with time limits or a minimum order value.

💡 Even knowing all these formulas, most e-commerce owners calculate ROMI “by eye”. That’s why ads stay at “break-even” while competitors keep growing.

---

Where ROMI usually leaks

Most entrepreneurs think of ROMI as “just a formula”: take revenue, subtract marketing, divide. In reality, this metric lives in connection with many other factors. Neglect them — and the ROMI figure turns into a nice but useless illusion.
Below are situations we regularly see with clients, which completely change the ROMI picture.

1) ROMI and inventory turnover

Term: Days Inventory Outstanding (DIO) — how many days on average a product stays in stock.
Example: a campaign shows ROMI of 60% — great! But 40% of the assortment is sitting idle, and the money is frozen in it.
Meaning: profit exists on paper, but you have no cash for new purchases.
What to do:

• Always check ROMI together with DIO. If products “stall” — even with high ad efficiency — look for ways to speed up turnover.
• Launch promotional bundles or flash sales to “free up” money.
• Adjust purchases for slow-moving SKUs.

2) ROMI and returns

Term: Net Revenue — revenue after deducting returns.
Example: Facebook Ads show an excellent ROMI of 45%, but the return rate in this channel is 18%. After recalculating based on net revenue, ROMI drops to 12%.
Meaning: the channel is “eating” the marketing budget, even though it looked profitable.
What to do:

• Always calculate ROMI based on net revenue.
• Analyze returns by channel and optimize creative or targeting.

3) ROMI and LTV (Lifetime Value)

Term: LTV — how much a customer brings on average over the entire lifecycle.
Example: in the first month a channel shows ROMI of −20%, but these customers buy again, and after six months ROMI reaches +80%.
Meaning: short-term analysis kills long-term sources of profit.
What to do:

• Track ROMI in two horizons: short (30 days) and long (6–12 months).
• Make channel decisions considering repeat rates and AOV on repeat.

4) ROMI and traffic buying model

Terms: CPC (Cost Per Click) and CPA (Cost Per Action).
Example: switching to CPA payment temporarily lowers ROMI — the algorithm is learning and in the first weeks delivers fewer sales.
Meaning: premature channel shutdown because of “bad” ROMI during the test phase.
What to do:

• Allow a test period of at least 2–3 months.
• Compare ROMI cumulatively, not only at the campaign launch moment.

5) ROMI and seasonality

Term: Seasonal Budgeting — allocation of advertising budgets between peak and “quiet” seasons.
Example: in November ROMI = 70%, in February = 15%.
Meaning: the channel hasn’t become worse, demand has simply dropped.
What to do:

• Include “quiet” months in your strategy by reducing spend or shifting to stable-demand channels.
• Compare ROMI separately “in season” and “off-season.”

6) ROMI and attribution

Term: Attribution Model — the method of distributing sale value across channels.
Example: in a last-click model ROMI in Google Ads is low, but in multi-touch attribution this channel “warms up” most customers who later complete the purchase through another channel.
Meaning: you might switch off a channel that actually makes an important contribution to sales.
What to do:

• Test different attribution models.
• For strategic decisions, use multi-channel reports.

💡 Conclusion: ROMI is not a standalone metric but part of a complex equation that involves returns, inventory turnover, repeat purchases, seasonality, and attribution. Ignore even one factor — and you risk flying blind.

---

What ROMI should be in your segment (benchmarks)

If you are below these figures, your business is already losing money.

Segment	Average ROMI
Fashion, clothing	30–50%
Electronics	20–40%
Home and garden	40–60%
Luxury goods	50–80%
FMCG	10–30%
Subscriptions	40–70%

ROMI affects not only advertising — it is directly connected with margin, capital turnover speed, purchasing strategy, LTV, and even your attractiveness to investors. Ignore these connections and you risk a cash gap even with growing sales.

---

Mini-test: do you have a ROMI problem?

• ROMI below 20% in at least one channel
• Returns above 10% in any channel
• No LTV tracking
• Purchases made without demand forecasting
• No ROMI breakdown by channels in reports

If you marked at least 2 points, you urgently need diagnostics.

---

What happens if you change nothing

💡 You think advertising works, but in fact it has been running at a loss for 4 months — it just doesn’t show in the reports.
Every day you don’t know your exact ROMI, you are losing money. Not “sometime in the future” — right now.

• In a few months you will already lose profit equivalent to the salaries of the whole team.
• In six months this amount can turn into the cost of a new warehouse or a batch of goods.
• And in a year you risk running out of working capital and going negative even with growing sales.

The most dangerous thing is that ROMI does not hit immediately — it works like a leak in a tank that you cannot see. While the figures in the reports look “normal,” advertising slowly burns your budget, and you scale what is actually generating losses.
And yes, this is not something that “might” happen — it is already happening, you just have not calculated it yet.

🛒 Case: online clothing store (€400K turnover)

The owner calculated ROMI once per quarter, without considering returns. On paper everything looked fine, but profit was literally “melting,” and there was never enough money for new purchases.
After diagnostics ROMI grew from 12% to 46% in 2 months, inventory turnover decreased from 180 to 65 days, and the account gained +33 days of free cash flow.

---

How to fix it before it is too late

Start with diagnostics, find out where your profit is leaking and how to fix it. This is not just a report. This is the first step to a system where ROMI grows together with turnover, and you sleep peacefully.

Diagnostics of financial chaos for only €250:

• analysis of P&L, cash flow, sales channels and purchases
• ready 30-day roadmap
• unit economics template (3 channels and 10 SKUs)
• report “Where is money frozen?”
• review of ROMI, CAC, AOV with recommendations

What you get after diagnostics

• Your ROMI grows together with turnover — we eliminate unprofitable channels and strengthen profitable ones, without “favorites” and wasted budget.
• Every channel works for profit — you know what to keep and what to switch off, and you do it without risk.
• You see where the money is in real time — no surprises when the account is empty despite growing sales.
• A financial model that works without you — no more manual collection of data from scattered reports.

💬 I want diagnostics and an optimization plan

🎯 We take no more than 5 such projects per month to work in depth. This month only 2 slots are left.