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 |
Return Value | The Gross Revenue Value of all items that are being returned |
Taxes | The taxes you have to pay on your not-returned gross revenue |
Net Revenue | Gross Revenue - Return Value - Taxes |
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How is Shopify different
Shopify is using three different revenue terms.
Total Sales
Gross Sales
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.