Net Gross Profit 1
Net Gross Profit 1 is gross sales minus returns and cost of goods sold. It is Gross Profit 1 with returns taken out first.
Net GP1 = gross sales − returns − COGS
Why the Net variant exists
A returned order is not a neutral event. The revenue reverses, but the cost of goods is only recovered if the item can be resold — and in fashion, seasonality means a proportion cannot be resold at full price, or at all. Net GP1 is where that reality first appears.
The gap between GP1 and Net GP1 is effectively your return exposure at the product level. A category with a 40% return rate needs a materially higher GP1 than one with 5% to end up in the same place.
Getting the timing right
Returns arrive weeks after the sale, so calculating Net GP1 on realised returns lags reality and flatters a growing business. Using an expected return rate per product or category gives you a usable number at order time — which is the only version that can inform a decision while you can still act on it.
What to use it for
Buying and assortment decisions in return-heavy categories. If two products have similar GP1 but very different return profiles, Net GP1 is what tells you which one to reorder. It is also the honest basis for comparing categories that behave differently on returns — comparing them on GP1 systematically favours whichever returns more.
The full framework
| Metric | Calculation |
|---|---|
| Gross Profit 1 | Gross sales − COGS |
| Gross Profit 2 | Gross sales − COGS − fulfilment |
| Gross Profit 3 | Gross sales − COGS − fulfilment − marketing |
| Net Gross Profit 1 | Gross sales − returns − COGS |
| Net Gross Profit 2 | Gross sales − returns − COGS − fulfilment |
| Net Gross Profit 3 | Gross sales − returns − COGS − fulfilment − marketing |
Two rules make the whole set readable: the number tells you how many cost layers have been deducted, and the Net prefix tells you whether returns have been taken out first.
See financial controlling for expected returns applied at order level.
Related terms
Gross Profit 1
Gross Profit 1 is gross sales minus cost of goods sold. It is the first and broadest profit layer — useful for judging buying and pricing, but blind to fulfilment, marketing and returns.
Net Gross Profit 2
Net Gross Profit 2 is gross sales minus returns, cost of goods and fulfilment. It is the numerator in epROAS, and the most complete view of unit economics before marketing.
Net Sales
Net sales is gross sales minus returns, discounts and allowances. It is the first figure in an e-commerce P&L that reflects money the business actually kept.
Cost of Goods Sold (COGS)
The cost of goods sold signifies the total expense of purchasing the products sold, meaning the cost appears first when you sell the product.
Turn data into decisions.