Revenue Defintion Klar vs Shopify

Why the Klar revenue likely differs from what you see in Shopify and why we think our definition makes way more sense.

Valentine Strunz-Happe avatar
Written by Valentine Strunz-Happe
Updated over a week ago

Are you looking at Klar and wondering why the revenue numbers differ from the ones you see in Shopify?

Then you have come to the right place.

For unknown reasons, Shopify is using rather unusual definitions for their revenue metrics. Here we show you, how our revenue definitions vary from those used in Shopify and why we think they make way more sense.

Introducing Common Terminology

In Klar, we use a clean waterfall method to define our revenue metrics. Let's run through the waterfall and define the different steps along the way.

Gross Merchandise Value

The original selling price of a product before any deductions

Price Reductions

The reduction in price offered to all customers (using the Compare At price in Shopify)

Discount Code Value

The reduction in price through Discount/Voucher Codes and Cart Rules.

Shipping Revenue

The fee you charge customers to deliver their order.

Gross Revenue

Gross Merchandise Value - Price Reduction Value - Discount Code Value + Shipping Revenue
—> Think: The money the customer needs to pay.

Return Value

The Gross Revenue Value of all items that are being returned
—> Think: The money you have to pay the customer back.

Taxes

The taxes you have to pay on your not-returned gross revenue

Net Revenue

Gross Revenue - Return Value - Taxes
—> Think: The money I can use to cover my costs. If not defined differently, all revenue numbers in Klar are Net Revenue numbers.

How is Shopify different

Shopify is using three different revenue terms.

  1. Total Sales

  2. Gross Sales

  3. Net Sales

Using the terminology we introduced above, let's see how each of them is defined.

Total Sales

Gross Merchandise Value - Price Reduction Value - Discount Code Value - Return Value + Shipping Revenue

Gross Sales

Gross Merchandise Value - Price Reduction Value - Tax Value

Net Sales

Net Revenue - Net Shipping Revenue


Return Date Difference

Klar associated the return to the date the order was placed, Shopify to the day the return was logged.

So if an order is placed on the 5th of May and returned on the 15th of May, Klar will set the return value on the 5th of May whereas Shopify will set it on the 15th.


Gift Voucher Difference

Klar captures revenue from the sale of gift vouchers on the day of the purchase of the gift voucher.

Shopify however, only captures this revenue on the day the voucher is used.

We suggest to set the payment costs for gift vouchers at 100% to not double count this revenue.

Example - Selling a pair of sneakers

Let's make this a bit more tangible with an example.

Say, I sell a pair of sneakers which have a tax rate of 20%. They normally sell for €120 but they are not selling well, so I reduce the price to €100 using the "Compare At" price function.

A customer comes to my store and buys two pairs, to try on different sizes using a 10% discount code. Additionally, I charge him €5 for delivery, bring the total to €185.

He returns one of the sneakers, so we have to reimburse him €90.

Revenue metrics in Klar

Let's run through the waterfall in Klar:

Gross Merchandise Value: €240

Price Reduction Value: -€40

Discount Code Value: -€20

Shipping Revenue: +€5

Gross Revenue: €185

Return Value: -€90

Taxes: -€15.83

Net Revenue: €79.17

Revenue metrics in Shopify

Total Sales: €95

Gross Sales: €184.17

Net Sales: €74.17

Klar's clear structure makes it much easier to understand where the drop-offs are taking place and spot trends and opportunities for improvement.

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