Ecommerce unit economics: MER, POAS, break-even ROAS

Revenue tells you nothing. Margin tells you something. Unit economics tell you whether your business actually works. Here are the four numbers every serious ecom operator needs to know — what they are, how Ecom Forward computes them, and what to do when they move.

Contribution Margin (CM)

Net Revenue − COGS − Transaction Fees − Ad Spend

The profit left over after every variable cost — but before operating expenses (rent, team, tools). If CM is negative, every sale makes you poorer. You cannot scale out of a negative-CM business.

CM % = CM / Net Revenue. Healthy DTC: 25-40%.
If CM% is <15%, scaling is almost impossible — ops costs will eat you alive.

MER (Marketing Efficiency Ratio)

Total Revenue ÷ Total Ad Spend

The CFO's number. Ignores platform-reported ROAS (which is optimistic and fragmented) and just divides your top line by your ad spend across all channels.

MER 2× — every $1 of ad spend returns $2 of revenue.
MER 3× — healthy for most DTC.
MER 5×+ — excellent. Ramp spend.
MER < 1.5× — either you're early (launch/brand-building) or you're burning money.

Tip

MER is the best single number to monitor weekly. Platform ROAS is useful for creative optimization; MER is what you show investors.

POAS (Profit on Ad Spend)

Net Profit ÷ Ad Spend

The real efficiency metric. Same idea as ROAS but with profit on top instead of revenue. Answers: “for every $1 I spent on ads, how many dollars of profit did I bank?”

POAS 1× — ad spend broke even after everything.
POAS 2×+ — healthy. Ad spend meaningfully contributes to profit.
POAS < 0.5× — your ads are making money for Meta, not for you.

Break-even ROAS

Gross Revenue ÷ (Gross Revenue − COGS − Transaction Fees)

The minimum ROAS your ads need to break even on the sales they drive. It's based purely on the margin you have beforeads — so it's the target a media buyer sets, independent of how much you actually spend. If your products and fees leave you 50% to work with, break-even ROAS is 2×. If they leave you 25%, it's 4× — below that, every ad dollar loses money.

Heads up

Don't confuse this with 100 ÷ CM%(an old formula we used to show). Contribution margin already subtracts ad spend, so dividing by it double-counts your ads and makes break-even ROAS look far scarier than it is. The formula above is the correct one, and it's what Ecom Forward now shows everywhere — the P&L, Ford, and the per-product break-even target in your Catalog.

Ecom Forward computes this live on the P&L, and you can set a break-even ROAS target per productin your Catalog so Ford can flag products whose real break-even is higher than what you're targeting.

Per-order economics

The P&L also computes:

Revenue / order — AOV.
COGS / order — average product cost per order.
Ad Spend / order — a CAC proxy (gross — new + returning customers pooled).
Profit / order — the net dollars you keep per order.

Watch Profit/order over time. If it's compressing, something structural is happening — usually rising ad costs, shrinking AOV, or COGS inflation.

When to look at which

Daily: MER on the Dashboard.
Weekly: POAS + Profit/order on Performance.
Monthly: CM% + Break-even ROAS for strategic planning (ad budget, pricing, COGS negotiation).
Quarterly: All of them, against goals.