Answer

What is marketplace true-cost profit after fees, ads, shipping and returns?

Last updated 23 August 2026By MaxInvent Editorial Team

Short answer

True-cost profit is the revenue of an order minus every cost that order actually caused: the marketplace commission and settled fee lines, the invoiced courier charge with allocated surcharges, packaging, the cost of goods at the moment of dispatch, and a share of returns and advertising. It is usually several percentage points below the gross margin most sellers report.

Gross margin uses list cost and quoted postage; true cost uses settled fees and invoiced carriage
Cost of goods must be frozen at dispatch or historical margin keeps moving
Returns cost the outbound label, the inbound label and the handling
Advertising billed separately by the ad platform has to be layered on deliberately

A worked example on one order

These are illustrative figures, not customer data. The point is the shape of the gap between gross margin and true contribution, which in most marketplace operations is wider than expected.

Illustrative true-cost profit calculation on a single £24.99 order
Line	Amount	Where it comes from
Order value	£24.99	Marketplace order record
Commission at 12%	−£3.00	Settled marketplace fee lines
Carriage (quoted £3.60)	−£4.85	Reconciled courier invoice, after fuel and re-weigh
Packaging	−£0.35	Per-order and per-parcel cost defaults
Cost of goods, rebate-net	−£11.20	Snapshot taken at courier dispatch
Contribution before returns and ads	£5.59 (22.4%)	Order-level profit
Returns at 6%, £7.10 each	−£0.43	Observed SKU return rate and cost
Advertising at 4% of revenue	−£1.00	Apportioned from channel ad spend
True contribution	£4.16 (16.6%)	Against a gross margin that would read 33%

Two lines do most of the damage, and both are invisible at the moment of sale: the £1.25 difference between quoted and invoiced carriage, and the £1.43 of returns and advertising that never appears on the order itself.

Why cost of goods has to be frozen at dispatch

If margin is recalculated from today’s cost price, historical profit moves whenever a supplier price or rebate changes. A price rise makes last quarter look worse than it was; a rebate makes it look better. Neither reflects what happened, and both undermine the report as a basis for decisions.

The fix is a snapshot. MaxInvent captures rebate-net cost of goods when the courier dispatches the order, so the figure for a shipped order stops moving. This is the single most common reason two profit reports of the same period disagree.

Facts, estimates and where to be honest about the difference

Facts. Order value, settled marketplace fee lines, invoiced carriage and allocated surcharges, and cost of goods at dispatch. These come from records.
Reasonable estimates. Packaging cost per parcel and the return rate and return cost for a SKU. These are observed averages applied forward.
Modelling choices. Advertising apportionment. Attributing a platform’s separately billed ad spend to individual orders is a decision, not a measurement — so state the basis and keep it consistent.

Keeping those three categories distinct is what makes the number usable in an argument. A single figure with an unstated mix of facts and assumptions loses the argument the first time somebody asks how it was built.

What this is not

This is operational contribution, used for decisions about channels, products and couriers. It excludes overheads, staff and premises, it is not prepared on an accounting basis, and it is not a VAT calculation. Your statutory accounts remain the work of your accounting system and your accountant. To model a listing before you commit to it, use the marketplace fee calculator; to report on what actually happened, use profit analytics.

FAQ

More questions, answered

Can you show a worked example?+

Take an illustrative £24.99 order. Marketplace commission at 12% is £3.00. The label was quoted at £3.60 but invoiced at £4.85 after fuel and a re-weigh. Packaging is £0.35. Cost of goods at dispatch, net of rebate, is £11.20. That leaves £5.59, or 22.4%. Apply a 6% return rate costing an average £7.10 per return and roughly £0.43 comes off per order; add advertising at 4% of revenue, another £1.00, and the true contribution is about £4.16 — 16.6%, against a gross margin that would have read 33%.

Why does cost of goods have to be frozen at dispatch?+

Because otherwise last quarter's profit changes every time a supplier price or rebate changes. If margin is recalculated from today's cost price, a price rise makes historical performance look worse than it was and a rebate makes it look better, and neither reflects what happened. MaxInvent snapshots rebate-net cost of goods when the courier dispatches the order, so the historical figure stops moving.

How should returns be treated?+

A return is not a reversed sale. It costs the outbound carriage you already paid, usually an inbound label, the handling time, and any loss on resale if the item cannot go back to A-grade stock. The practical approach at SKU level is to apply the observed return rate for that SKU multiplied by its average return cost, rather than waiting for individual returns to land months after the sale.

What about advertising spend?+

Marketplace fees and charges that appear on your settlement records can be allocated to orders directly. Advertising platforms that bill you separately are a different matter: the spend is real but attributing it to individual orders is a modelling choice, not a fact. Most sellers apportion it as a percentage of channel revenue and say so, which is honest and good enough for decisions.

Is true-cost profit the same as accounting profit?+

No. This is operational contribution used for decisions about channels, products and couriers. It excludes overheads, staff and premises, and it is not prepared on an accounting basis. Your statutory accounts and VAT return remain the work of your accounting system and your accountant.

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