Baking Supplies Ecommerce Metrics Glossary: The Terms That Matter

How to read the glossary and worked example

Use each glossary entry as a decision aid, not as a score to improve in isolation. First check the definition, the formula, the time period and whether the figure includes GST, refunds, returns, shipping or advertising. Then ask what decision the measure supports and whether the data is complete enough to act on.

Revenue measures sales recorded under the chosen rules. Profit subtracts costs, so it shows whether those sales created an economic return. Cash measures money received and paid, so timing matters: a profitable month can still have tight cash after a large stock purchase. GST is separate from trading performance. business.gov.au (Australian Government) says GST is 10% on most goods and services sold in Australia, and registered businesses collect the GST portion as one-eleventh of the sale price. A business must register once its GST turnover is $75,000 or more (Source: business.gov.au (Australian Government)).

Read the separately added worked example from left to right: identify the inputs, follow the formula, then interpret the output against the decision it is meant to inform. Do not treat its result as a forecast or a target for every store, and do not assume it will occur in your store. Replace its figures with your own period, currency and accounting treatment before applying the logic. ORVX keeps each merchant’s trading currency separate and can calculate realized revenue from delivered orders only.

Revenue terms that show sales quality

Gross sales measures the value of items sold before discounts, refunds or returns: Σ(list price × quantity). If 10 piping bags sell at $20 each, gross sales are 10 × $20 = $200. Use it to assess demand and merchandising activity, but not cash retained or realised revenue. Keep shipping and GST treatment consistent; for a GST-registered Australian store, business.gov.au says GST is one-eleventh of the sale price, so a $110 customer payment includes $100 sales and $10 GST.

Net sales removes discounts, refunds and returned or cancelled orders from gross sales: gross sales − discounts − refunds/returns. Using $200 gross sales, $20 discounts and $30 refunds gives $150 net sales. Use this for revenue comparisons and sales targets because it reflects what the store actually retained from completed sales. ORVX calculates realised revenue from delivered orders only.

Average order value (AOV) shows the average net sales per order: net sales ÷ completed orders. If net sales are $1,500 across 60 delivered orders, AOV is $1,500 ÷ 60 = $25. Use it when assessing bundles, free-shipping thresholds or cross-sells; pair it with profitability before changing an offer.

Sales growth compares revenue across equivalent periods: (current net sales − previous net sales) ÷ previous net sales × 100. Growth from $10,000 to $12,000 is ($2,000 ÷ $10,000) × 100 = 20%. Use it to judge whether demand is expanding, while checking order count, AOV and returns to identify what caused the change.

Margin terms for product and order decisions

Gross profit is realized revenue minus cost of goods sold (COGS): the dollars left from selling products before advertising and other operating costs. Gross margin is gross profit divided by realized revenue. Use these for product and collection decisions: a low-margin cake turntable may need a price, supplier-cost or range decision even if it sells well.

Contribution margin goes further by subtracting variable selling costs, such as advertising, payment fees and shipping subsidies, from revenue. It shows what an order or product contributes toward fixed costs. Customer acquisition cost (CAC) is advertising and acquisition spend divided by new customers acquired. CAC measures marketing efficiency, not product economics; compare it with contribution per acquired customer, not with gross margin alone. Keep GST treatment consistent: business.gov.au says GST is 10% on most Australian sales and registered businesses collect one-eleventh of the sale price (Source: business.gov.au (Australian Government)).

Customer terms beyond order count

Customer acquisition cost (CAC) shows what it costs to win a new customer: advertising and acquisition spend ÷ new customers. If you spend $2,400 to acquire 60 customers, CAC is $40. Compare this with first-order contribution: if each first order contributes $28 after product and variable costs, acquisition has not paid back on the first order. Review channel economics before scaling spend.

Repeat purchase rate shows retention, not order volume: customers with two or more orders in the period ÷ customers who ordered in the period. If 30 of 120 customers buy again, the rate is 25%. Act on retention when it falls against your own previous period or customer cohort; investigate replenishment timing, product fit and post-purchase service rather than automatically increasing acquisition.

Customer lifetime value (CLV) estimates the value of a customer over the relationship. A simple gross-profit version is average order value × purchases per customer per year × gross margin × expected years. At $60 × 2 × 50% × 2, CLV is $120 before acquisition costs, so a $40 CAC may be supportable if the assumptions hold. Refund rate is refund value ÷ gross sales: $450 of refunds on $9,000 is 5%. Act on service or product issues when refunds rise or cluster by SKU, reason or fulfilment period. ORVX can show customer-level profitability, repeat behaviour and refund value against revenue.

Stock and cash metrics for purchasing

Inventory turnover = COGS ÷ average inventory value for the period. It shows how often stock converts into sales, making it useful for reviewing purchasing efficiency. A low result can point to slow-moving cake tins, seasonal cutters or excess colour gels, but compare products with similar seasonality and margin. Stock cover = current units ÷ average units sold per week. Use it to decide whether another purchase is sensible: 12 weeks of cover for a product that sells steadily may tie up cash, while a short-cover item may risk a stockout.

Sell-through = units sold ÷ units available × 100, where units available can include opening stock and receipts. It is the better measure for judging a buying batch or seasonal range. Cash conversion connects the decision to liquidity: cash conversion cycle = days inventory outstanding + days sales outstanding − days payable outstanding. If customers pay at checkout but suppliers require payment before delivery, slow stock keeps cash unavailable even when reported profit looks healthy. ORVX shows inventory position, dead stock and remaining stock value alongside product profitability; use those figures with supplier payment dates before committing cash to a reorder.