How do you calculate ROI in e-commerce?

ROI determines the approximate profitability of an investment. You can calculate your ROI by dividing the net return on your investment by the investment cost and multiplying it by 100.

ROI = Net return / Cost of investment × 100%

Here, you can find the net return by subtracting the initial value of investment (IVI) from the final value of investment (FVI), so the formula becomes:

ROI= (FVI - IVI) / Cost of investment × 100%

Here is how you can calculate return on investment (ROI) in eCommerce:

1. Subtract the initial value of investment from the total investment.
2. Divide the number by the total investment cost.
3. Finally, multiply that figure by 100 to achieve ROI.

Determining a good ROI for e-commerce is challenging, as there are no fixed criteria and many variables affect it. For e-commerce PPC advertising, an ROI of 25-50% is considered good. However, the ROI benchmark in marketing is to achieve is 5:1 ratio, and anything below the 2:1 ratio is not regarded as profitable.

ROI (return on investment) is a financial metric that tells us whether our investment brings profit. A negative percentage depicts a loss, whereas a positive ROI indicates profit. Moreover, ROI helps you grow your business by comparing the amount you invested and earned through that investment.

The mathematical expression to calculate the ROI in Ecommerce is as follows:

Return on Investment = (Net Profit/Cost of Investment) x 100