What is a good ROAS for an Australian ecommerce store?

Return on ad spend is the most quoted and least understood number in ecommerce. Ask five agencies what a good ROAS looks like and you will get five confident answers, none of them grounded in your cost of goods, your freight bill or your return rate. The figure quoted in a case study is not a benchmark. It is a fact about somebody else's margin.

ROAS is revenue generated divided by advertising spend. Spend $2,000 and generate $7,000 in sales and your ROAS is 3.5x. That is useful as a ratio, but on its own it tells you nothing about whether you made money, because revenue is not profit. The question worth asking is not "is 3.5x good" but "what does this store need to earn on each advertising dollar before it stops going backwards". That number is knowable, it is specific to you, and most owners have never calculated it.

How do you work out your break-even ROAS?

Start with contribution margin, the share of each sale left after the costs that vary with the order. That means selling price minus cost of goods, inbound freight, outbound shipping, packaging, payment processing fees and the average cost of returns, divided by the selling price. Most owners overstate this because they only subtract cost of goods. Freight and returns are where Australian margins quietly disappear.

Then the formula is unglamorous and exact: break-even ROAS = 1 ÷ contribution margin. At a 40% margin you need 2.5x on every advertising dollar just to stand still. The table below is an illustrative guide, not a benchmark, and the point of it is the shape of the relationship rather than any one row.

Contribution margin	Break-even ROAS	What a 3x ROAS means
20%	5.0x	Losing money on every order
30%	3.3x	Still slightly behind
40%	2.5x	Profitable, modest headroom
50%	2.0x	Profitable, comfortable headroom
60%	1.7x	Strongly profitable

Two stores can report an identical 3x and be in completely different businesses. This is why margin work is not separate from marketing work. Every point of contribution margin you recover lowers the bar your advertising has to clear, which is the same logic behind a proper break-even analysis at the whole-business level.

What target ROAS should you actually set?

Break-even is the floor, not the goal. Your advertising also has to cover the fixed costs that do not move with order volume: rent, software, wages, your own time. A practical approach is to set a target above break-even wide enough to fund those overheads plus the profit you want, which for many stores lands somewhere between 1.3 and 2 times their break-even figure.

Be honest about what a high target costs you. Demanding 6x from a business that breaks even at 2.5x does not make you disciplined, it makes you small. Platforms hit high ROAS targets by narrowing delivery to the cheapest, most obvious buyers, many of whom would have found you anyway. The ratio looks excellent on the dashboard while total profit shrinks.

Why does a good ROAS look different on each channel?

Averaging ROAS across an entire account hides the thing you most need to see. Different campaign types do different jobs, and holding them to one target will cause you to switch off the campaigns that feed the rest.

Campaign type	What it is actually doing	Reasonable expectation
Branded search	Capturing people who already know you	Well above break-even, but partly demand you already earned
Retargeting	Closing people who nearly bought	Highest reported ROAS, smallest audience, limited scale
Shopping and non-brand search	Meeting active purchase intent	Comfortably above break-even at sensible volume
Prospecting on social	Creating demand that did not exist yet	Closer to break-even, and that can still be correct

Read these as a portfolio. Prospecting creates the audience that branded search and retargeting later convert cheaply, so killing prospecting because its ROAS is lowest will lift your average for a few weeks and then starve the campaigns you were proud of. The trade-offs between platforms are covered in more depth in Google Ads versus Meta Ads for Australian ecommerce.

Is your platform-reported ROAS telling the truth?

Every ad platform reports conversions it believes it influenced, using its own attribution window and its own modelling for the gaps. Google and Meta will both claim the same sale. Add up the platform figures and they routinely exceed the revenue that actually reached your bank account.

The corrective is blended ROAS: total revenue across the business divided by total advertising spend across all channels, for the same period. It is crude, it assigns no credit to anyone, and it is the only version that reconciles with reality. Use platform ROAS to decide what to change inside a campaign, and blended ROAS to decide whether the whole operation is working. Three habits keep the number honest:

• Compare like periods. A promotion week, a public holiday or a stock-out will move the ratio more than anything you did to the ads.
• Hold the attribution window still. Changing from a 7-day to a 1-day window changes the number without changing the business.
• Watch a trend, not a day. Daily ROAS on a small account is mostly noise, and reacting to it is how accounts get destabilised.

Wasted spend inflates the denominator and flatters nothing, which is why the audit described in reducing Google Ads wasted spend is usually the fastest route to a better ratio.

Should you chase ROAS or profit?

This is where the metric misleads good operators. ROAS is an efficiency ratio, and you can always improve a ratio by doing less. Cut back to only your best-performing campaigns and ROAS rises while total contribution profit falls, because the dollars you removed were still earning more than they cost.

The better test is marginal: does the next dollar of spend still return more than break-even? While it does, spending it grows profit even though it drags the average down. When it no longer does, that is your ceiling for now. A store at 4x on $10,000 of spend is usually worse off than the same store at 3x on $25,000, provided break-even sits at 2.5x. Total dollars pay wages; ratios do not.

Lifetime value can also move your floor, but only with evidence. If repeat purchase is measured and reliable, you can accept a first-order ROAS below break-even and recover it on later orders that carry no acquisition cost. That decision needs a real customer lifetime value calculation and the cash flow to fund the gap in between, not optimism. Paired with a defensible customer acquisition cost, it tells you how much you can genuinely afford to bid.

How do you improve ROAS without cutting spend?

Because ROAS is revenue over spend, every lever sits on one side of that fraction. On the revenue side: lift conversion rate so the same traffic produces more orders, raise average order value through genuine bundles and sensible free-shipping thresholds, and improve product pages so intent is not lost at the last step. On the cost side: eliminate spend against search terms that never convert, stop competing with yourself across campaigns, and tighten creative so you pay less for the same attention.

Under the Australian Consumer Law, the tactics that lift these numbers have to be real ones. Advertised prices must be genuine, savings claims must compare against a price actually charged, and delivery timeframes must be honest. Manufactured urgency and was-now pricing that was never real invite ACCC attention and erode the repeat purchase your economics depend on. Most of the durable gains here are the same five levers behind any ecommerce growth strategy, and they are the substance of Alpha Vault's e-commerce and performance marketing work.

Where to start

Do the arithmetic before you touch a campaign. Calculate your true contribution margin including freight and returns, divide one by it, and write that break-even figure where you will see it. Set a target above it that funds your overheads and your profit. Then track blended ROAS monthly next to total contribution dollars, and judge every change against whether profit grew, not whether the ratio did.

That single number changes the conversation. Instead of arguing about whether 3x is good, you will know precisely what your store needs, which campaigns clear it, and how much room you have to scale before efficiency turns against you. If you want a second set of eyes on your margin maths and what your advertising should realistically be returning, book a consultation and we will work through your numbers together.