Foundation · 2 min
What you need to know
Which ecommerce revenue metrics should I track?
Track gross merchandise sales, discounts, cancellations, refunds, net sales, shipping income, taxes and recognized revenue separately. Add order count and units so price and volume changes can be explained.
What is gross sales?
Gross sales are the value of products sold before discounts, cancellations and returns under the store’s documented definition. State whether the figure uses ordered, paid or fulfilled transactions.
What are net sales?
Net sales are gross sales reduced by discounts, cancellations, returns and allowances included in the reporting policy. Keep taxes, shipping and other income separate unless the definition explicitly includes them.
Gross sales vs net sales: what’s the difference?
Gross sales show pre-reduction selling value; net sales show the amount remaining after defined reductions. A store can grow gross sales while net sales weakens because discounts or refunds rise.
Should refunds reduce reported sales?
Yes, in net-sales and net-revenue reporting. Also retain gross sales and refund measures separately so return activity remains visible rather than disappearing inside one number.
Should discounts reduce reported sales?
Yes, discounts should reduce net sales because the customer did not pay the list-price amount. Report discount value separately to explain the bridge from gross to net.
Should shipping revenue count as product revenue?
Show shipping charged to customers as shipping income or a separate revenue line rather than product revenue. This makes product demand and shipping economics easier to evaluate.
Should taxes count as revenue?
Taxes collected for a government should normally remain separate from merchandise revenue in management reporting. Apply the store’s accounting policy and local requirements consistently.
A quick store check
Reconcile gross sales to net sales using discounts, cancellations and refunds, while keeping shipping and taxes separate.
Foundation · 2 min
Frequently asked questions
Can gross sales be used as revenue?
It can be reported, but it should not be confused with net sales or recognized revenue after discounts and reversals.
Why should tax be shown separately?
Tax collected for authorities is economically different from merchandise revenue and should not inflate product performance.