Net Gross Profit 2
Net Gross Profit 2 is gross sales minus returns, cost of goods and fulfilment. It is the most complete picture of a sale's unit economics before any marketing cost is applied.
Net GP2 = gross sales − returns − COGS − fulfilment
Why this is the number to steer on
Net GP2 captures every cost that varies with the sale except marketing, including the two that most reporting misses: the fulfilment cost of getting the item out, and the full cost of it coming back. A return incurs outbound shipping, return shipping and handling — so a returned order is not simply a sale that did not happen, it is a sale that cost money.
That makes Net GP2 the honest denominator for product decisions and the correct numerator for profit-based ad measurement. In Dema it is exactly that: epROAS is Net GP2 divided by marketing spend.
The comparison that changes decisions
Two products, same GP2. One returns at 8%, the other at 45%. On GP2 they are equivalent and a campaign would happily push either. On Net GP2 the second may be barely profitable or negative — and the difference is invisible in every revenue-based report.
Practical notes
- Use expected returns, not realised. Otherwise the number arrives too late to act on.
- Include return handling, not just shipping. Inspection, repackaging and markdown on resale are real costs.
- Segment by category. A single blended return rate hides exactly the variation you need to see.
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 epROAS for how Net GP2 becomes a marketing efficiency metric.
Related terms
Gross Profit 2
Gross Profit 2 is gross sales minus cost of goods and fulfilment costs — storage, picking, packing and shipping. It is the first layer that reflects the real cost of getting the product to the customer.
Net Gross Profit 3
Net Gross Profit 3 is gross sales minus returns, cost of goods, fulfilment and marketing — the fullest measure of operational contribution in the framework.
epROAS
epROAS is expected Profit Return on Ad Spend. It divides Net Gross Profit 2 by marketing spend, so it accounts for both cost of goods and expected returns rather than measuring revenue against spend.
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.
Turn data into decisions.