Introduction
Analyzing your store sales data is always very important for any Shopify store and usually when we need to measure our store Sales growth, it’s mandatory to understand how to work with Shopify Net Sales and Gross Sales metrics.
In this article, we explain how to see the difference between these two metrics, how to calculate them and how to understand the impact of each on your business. We also show you examples of these two concepts and give you useful tools that help you improve your sales and profits.
What Are Net Sales and Gross Sales in Shopify?
Shopify Net Sales Definition
Net sales in Shopify are the revenue from sales after we deduct discounts, returns, and other operating costs. It gives store owners information about their real income and typically reported each week, month, or year.
Net Sales Without Cost Recorded Definition
Shopify's net sales represent the total revenue from sales after discounts, returns, and chargebacks have been taken out, but before the cost of goods sold and other expenses have been taken into account. This metric gives store owners a view of their revenue before operational costs.
Typically, it has the same meaning as the Net Sales after we deduct all costs but before subtract any costs associated with creating or buying the sold goods (taxes, for example).
Shopify Gross Sales Definition
Gross sales in Shopify are the total amount of money received from sales excluding only returns, discounts, and chargebacks. This metric captures the total sales volume generated by the store and is one of the easiest ways of measuring revenue.
Shopify Gross Sales vs. Total Sales
We also have a difference between Gross/Net Sales with Total sales which does not seem to be so visible from the beginning as they are quite similar, but it’s crucial to understand the differences and definitions of them.
Total Sales it’s your income after deducting returns and discounts before taxes and shipping fees.
Why Are Gross Sales and Net Sales Important
Shopify Gross sales and the numbers related to them are important because they offer views of different aspects of business success: Shopify Gross sales are an indication of the store’s market attraction and transaction capacity.
Gross sales are main indicator of store’s market ability to gain new customers and transaction capacity.
Net Sales Shopify provides a clearer picture of actual income and profitability.
Net Sales help in financial forecasting because they represent business earns after customer-related deductions.
Investors and stakeholders often count Net Sales to rate a business's financial health and to understand if a business still makes a profit.
A lack of knowledge on how to spot the difference between two metrics can lead businesses to issues with financial data, potentially affecting pricing strategies and revenue loss.
Differences Between Net Sales and Gross Sales
To better understand how these two metrics differ, here are the main differences:
How to Calculate Net Sales and Gross Sales in Shopify
Shopify Net Sales Calculation
Let’s gain knowledge about how to calculate both metrics in Shopify:
Net Sales = Gross Sales − (Discounts + Returns + Allowances)
If for the last month your store received following values:
- Total Sales: $10,000
- Discounts: $2,000
- Returns: $3,000
- Allowances: $500
Here’s how we can calculate your Net Sales:
10,000 - (2,000 + 3,500 + 500) = 4,000
Values definitions
- Gross Sales: Money you gain before any deductions.
- Sales Returns: Refunds when customers return products because of defects or any other reason.
- Allowances: Partial refunds are offered when customers have an issue with your product.
- Discounts: Price reductions to sell products faster, get rid of old inventory or improve your sales.
Gross Sales Calculation
Gross Sales = Number of Units Sold × Unit Price
If for the last month your store sells 100 products for $5 each:
Gross Sales = 100 × 5 = 500
Tips for Using Net and Gross Sales to Grow Your Shopify Store
To optimize business profit within a Shopify store we must analyze both Net Sales and Gross Sales data. Here are some strategies:
- Analyzing Gross and Net Sales trends helps understand market seasons so that marketing strategies can be adjusted accordingly.
- To increase our net sales pricing strategies, we must optimize and at the same time maintain the profit margin from discounts and promotions.
- To reduce returns for discounts, improve customer service quality, product descriptions and refund policies to make sure your customer has a great experience with your store.
- Understanding product performance helps you understand which items generate the most gross sales and which products require the highest returns.
- Sales reports can be detailed and useful for store owner's data-driven decisions with tools like Mipler.
- By dividing sales data into location or customer demographics, markets can be identified which perform best using sales reporting tools.
Using Mipler for Advanced Shopify Sales Reporting
Mipler is a powerful Shopify reporting tool that allows merchants to analyze Net Sales and Gross Sales in-depth. With Mipler, store owners can:
- Generate real-time sales reports.
- Compare total sales vs. net sales over different periods.
- Filter reports based on discounts, product categories, or customer segments.
- Save time for merchants by working with the creation of insightful reports, helping identify areas for sales improvement.
You can easily create Shopify Reports where you can see your Shopify view of Net Sales and Gross Sales, find Gross sales by just choosing the right report, and it will be already calculated according to your store units, discounts, returns and taxes so you don’t spend hours understanding many formulas or gaining all information about your store.
If you want to share your Shopify Net sales document with someone outside of the organization, you can easily export it to Excel format.
How to Get Gross Sales from Each State in Shopify
- Go to Shopify Admin > Apps → Mipler → Reports
- Select "Sales by Province/State"
- Filter results by state.
Conclusion
By using Net Sales, Gross Sales and Total Sales, store owners can start to understand their actual financial situation and make more clever decisions which lead their stores to bigger income. To get detailed insights, save your time and automate reporting, try using Shopify Sales Reports to increase your sales.
