Net Gross Profit 3
Net Gross Profit 3 is gross sales minus returns, cost of goods, fulfilment and marketing. It is the most complete layer in the framework — every variable cost of making and selling the order, deducted.
Net GP3 = gross sales − returns − COGS − fulfilment − marketing
What it is for
Net GP3 answers the question every other layer only partially addresses: did this product, campaign, channel or market actually add money to the business? Everything above it is diagnostic — Net GP3 is the verdict.
Because it nets out both returns and acquisition cost, it is also the layer where growth and profitability visibly trade off. A channel can raise revenue, GP1 and Net GP2 while Net GP3 declines, which is precisely the situation revenue-based reporting cannot detect.
Its relationship to break-even
Net GP3 is the contribution available to cover fixed costs — rent, salaries, tooling, overhead. That makes it the input to break-even analysis: the point where accumulated Net GP3 equals fixed costs is the point the business is genuinely profitable.
Two cautions
- It inherits your attribution. Marketing cost has to be allocated somehow, and a biased allocation produces a confidently wrong Net GP3. Corrected attribution matters — see causal attribution.
- It is a period measure, not a lifetime one. A first order can be Net GP3 negative and still be a good acquisition if the customer returns. Read it alongside lifetime value rather than in isolation.
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 Net GP3 by market, channel and product.
Related terms
Gross Profit 3
Gross Profit 3 is gross sales minus cost of goods, fulfilment and marketing. It is the layer at which a product, campaign or channel is either genuinely contributing or not.
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.
Customer Acquisition Cost (CAC)
Customer Acquisition Cost (CAC) is the total cost of acquiring one new customer: acquisition spend divided by the number of genuinely new customers. It is distinct from cost per order, which includes returning customers and therefore flatters performance.
Break-Even Point
The Break-Even Point, is when all revenue minus all costs, yield no profit or loss. It's crucial for businesses to track as it indicates the minimum sales required to cover costs and start earning profit.
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