Key takeaways
- There is no universal good ROAS. It depends on gross margin.
- Break-even ROAS = 1 / gross margin percentage.
- Use blended MER and contribution margin to guide scaling decisions.
Many founders chase a ROAS of 4x or 5x because they read it on social media. But a good ROAS for you is the number that leaves you profitable after product cost, shipping, payment fees, returns and overheads.
The formulas
- ROAS = revenue from ads / ad spend.
- Break-even ROAS = 1 / contribution margin (before ad spend).
- MER (marketing efficiency ratio) = total revenue / total marketing spend.
- Target ROAS = break-even ROAS x desired profit buffer (for example 1.2 to 1.5).
Example
Product price Rs 1,000. COGS Rs 300, shipping Rs 80, payment fees Rs 25, packaging Rs 40, expected returns and RTO cost Rs 55. Contribution margin before ads = 1,000 minus 500 = Rs 500, which is 50%. Break-even ROAS = 1 / 0.50 = 2.0. If you want profit, aim for a target ROAS of 2.4 to 3.0.
Break-even table
| Contribution margin | Break-even ROAS | Healthy target ROAS |
|---|---|---|
| 70% | 1.43 | 1.7 to 2.1 |
| 60% | 1.67 | 2.0 to 2.5 |
| 50% | 2.00 | 2.4 to 3.0 |
| 40% | 2.50 | 3.0 to 3.8 |
| 30% | 3.33 | 4.0 to 5.0 |
| 20% | 5.00 | 6.0 to 7.5 |
Indicative ROAS ranges by category (India)
| Category | Typical ROAS on Meta |
|---|---|
| Beauty and skincare | 2.5x to 4.5x |
| Fashion and apparel | 1.8x to 3.5x |
| Jewellery | 2x to 5x |
| Food and snacks | 2x to 3.5x |
| Home and living | 2x to 4x |
| Health supplements | 2x to 4x |
First order vs lifetime value
Compute 90 day LTV: average order value x orders per customer x contribution margin. Then compare to customer acquisition cost (CAC). A healthy LTV to CAC ratio is 3 to 1 or better.
How to improve ROAS without cutting spend
- Improve conversion rate. See conversion benchmarks.
- Increase AOV with bundles and free shipping thresholds.
- Test better creatives.
- Reduce RTO by encouraging prepaid orders.
- Exclude existing customers from prospecting campaigns.
Why platform ROAS can mislead
Meta and Google both attribute conversions to themselves. Use blended MER and compare week over week changes. Tools like Shopify's reports, Triple Whale, or a simple spreadsheet with total revenue and total spend give a more honest picture.
When to scale
Scale when blended MER stays above your target for 7 to 10 days, creatives are rotating, and inventory and fulfilment can handle volume. See Meta ads scaling rules.
Numbers in this article are indicative working ranges drawn from public industry reports and typical campaign patterns in India. Your results will vary by offer, price point, location, and creative quality. Always validate against your own data.
Frequently Asked Questions
What is a good ROAS for a Shopify store?
It depends on margin. Brands with 50% contribution margin break even near 2x and generally want 2.5x to 3x. Low margin brands need 4x or more.
How do I calculate break-even ROAS?
Divide 1 by your contribution margin before ad spend. A 40% margin gives a break-even ROAS of 2.5.
What is MER?
Marketing efficiency ratio is total revenue divided by total marketing spend. It avoids platform attribution bias and is useful for scaling decisions.
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