"ROAS 300%, so we're profitable." I've seen this line in dozens of internal EC reports — and in maybe half of them, the business was actually losing cash. The trap is gross margin. For a 30%-margin product, ROAS 300% is barely above breakeven. Same ROAS, different margin, opposite conclusion.
This post walks through why ROAS alone is a misleading profitability signal, what gross margin actually is, where typical EC verticals land (15–75%), and the 3-step method I use to measure it from real data.
TL;DR
Gross margin = (revenue − COGS) ÷ revenue × 100. Business decisions run on gross profit, not revenue
EC gross margins span 15–75% by vertical (cosmetics 60–75%, electronics 15–25%)
