What ROAS measures
ROAS means return on ad spend. It is the revenue your ads bring in divided by what you spent on them. For example, spend ₹10,000 and make ₹30,000 in sales, and your ROAS is 3. It shows how hard each ad rupee works for a direct-to-consumer (D2C) brand. It does not show whether you made money, because it ignores every cost except the ad itself. That is why there is no single good ROAS for every brand. A store selling at a thin margin needs a much higher ROAS than one with a fat margin. Your target has to come from your own numbers.
Break-even ROAS from your margin
Break-even ROAS is the point where ads neither make nor lose money. The formula is 1 divided by your margin before ads. That margin is what is left of the selling price after every cost except ads, shown as a share of the price. Those costs are product, shipping, packaging, payment charges and the shipping you lose on returned parcels. Here is a worked example. A ₹1,000 order with ₹600 of those costs leaves ₹400, a 40% margin. Break-even ROAS is 1 divided by 0.4, which is 2.5.
Calculate your break-even ROAS
- Take your average selling price per order, for example ₹1,000.
- Add up every cost per order except ads: product, shipping, packaging, payment charges and shipping lost on returns, for example ₹600.
- Subtract those costs from the price to get your margin before ads: ₹400.
- Divide that by the price to get your margin as a share: 0.4, or 40%.
- Divide 1 by that share: 1 divided by 0.4 = 2.5. That is your break-even ROAS.
Why a high ROAS can lose money
Ad platforms count an order when it is placed, not when it is paid. On COD, some parcels come back as RTO, or return to origin. The sale never happens, but the shipping is still yours. So the ROAS in your dashboard is higher than the ROAS in your bank. As a worked example, if 1 in 5 orders never arrives, a dashboard ROAS of 3 is 2.4 in delivered sales. Judge your ads on delivered revenue, and compare that with your break-even.
ROAS vs profit per order
Two campaigns with the same ROAS can leave very different rupees. ROAS is a ratio, so it hides the size of the order. Take a 40% margin and a ROAS of 3. A ₹2,000 order leaves about ₹133 after ads. A ₹500 order leaves about ₹33. Track profit per order after ads next to ROAS, because profit is what pays for rent and new stock. This is also why raising your average order value helps. Bundles and add-ons lift the rupees per order without touching the ratio.
Setting your target
Your target ROAS should sit above break-even, with room for profit. Pick the profit you want as a share of each order. Subtract it from your margin before ads, then divide 1 by what is left. With a 40% margin and a 10% profit target, 1 divided by 0.3 gives a target ROAS of about 3.3. Review it each month as costs change. The Storemate's built-in analytics show sales, orders and average order value in one place, which keeps these inputs current.