Have you ever looked at your fashion e-commerce figures and asked yourself: “But how much am I really earning?” Or are you trying to understand how to calculate ROI before launching your brand? If you find yourself in one of these situations, you're in the right place.
I am Corrado Manenti, founder of Be A Designer, and for over 14 years I have been accompanying aspiring designers on their entrepreneurial journey. I have seen hundreds of brands emerge, grow and – yes – even some close down. And do you know what the difference is between those who succeed and those who don't? It's not just creativity or the product: it's the understanding of how money works in the fashion business.
In this article, I will guide you through the real numbers of fashion e-commerce – but don't worry, you don't need a degree in economics. I will explain everything in a simple way, with concrete examples that you can apply to your project.
What does “Roi” mean?”
I know what you're thinking: “Here come the incomprehensible acronyms”. I understand. The business world is full of acronyms that seem designed to confuse. But ROI is actually a very simple concept., and once you understand that, it will change the way you look at your brand.
ROI is about to Return on Investment, or “return on investment“In simple terms: How much money do you get back for every euro you invest?
Let's take a practical example. Imagine investing £10,000 to launch your first collection. After a year, you have sold £25,000 worth of products and, after deducting all expenses, you are left with £5,000 in net profit. Your ROI is 50% – you earned half of what you invested.
Is it good? It depends. If you did it in 12 months, it's great. If it took you 5 years, not so much. ROI tells you whether it's worth the effort – whether your money is working well for you or whether you would have been better off leaving it in your bank account.
And ROAS? The cousin of ROI
The ROAS (Rendimento della spesa pubblicitaria) is specific to advertising – how much you earn for every pound spent on adverts. If you spend £100 on advertising on Instagram and generate £400 in sales, your ROAS is 4x. This means that every euro spent on advertising brings you four euros back.
⚠️ Why are these numbers so important? Because in fashion – more than in other sectors – it is very easy to delude yourself. You see sales rising, followers increasing, compliments coming in... but then you look at your bank account and it doesn't add up. I have seen brands with a turnover of €100,000 end up making a loss. And others with a turnover of €30,000 living happily. The difference? The latter knew their numbers.
How to calculate your brand's ROI: a practical formula
But how to calculate ROI In practical terms? The formula is simple. But the devil is in the details: what do you include in “net profit” and what do you include in “total investment”? Let's look at a real example.
Total investment: €20,000
First-year results
How to calculate the ROAS of marketing campaigns
For individual advertising campaigns, the calculation is different. Practical example: you spend £500 on an Instagram campaign and generate £2,000 in tracked sales. Your ROAS is €2,000 ÷ €500 = 4x.
What is a good ROAS in fashion? It depends on your margins:
- Gross margin 60%? You need at least a 2x ROAS to break even.
- To be profitable: Aim for a minimum ROAS of 3x-4x
- Top performers: Achieve ROAS of 5x-8x
The Most Common Mistakes in Calculating ROI
After years of consulting, I have seen the same mistakes repeated. Here's what NOT do:
- Forget your time: If you spend 30 hours a week on the brand, those hours have value (at least £15-20/hour).
- Ignore returns: Those 24% of orders that come back erode actual turnover.
- Exclude hidden costs: PayPal fees (2-3%), gateways, subscriptions, packaging... it all adds up.
- Confusing turnover and profit: Invoicing €50,000 with a net margin of 5% means earning €2,500.
Create an Excel spreadsheet to track all your costs – even the small ones. Update it every month. At the end of the year, you will have a realistic overview of how to calculate ROI of your brand without any surprises.
The online fashion market: a sea of opportunities
Before diving into the figures for your future brand, let's look at the big picture. Because context matters.
What does it mean to you that you are thinking of launching a brand? Two things:
✓ The good news: There is room for everyone. The market is growing so fast that new players can enter and carve out their own slice. You don't have to “steal” customers from the big players – you just have to find your own.
⚠️ The less favourable news: Competition is fierce. And margins have narrowed compared to a few years ago. It is no longer enough to have a good product and a nice website. You need a strategy.
How much do you have left in your pocket?
Let's be clear: turnover is vanity, profit is reality. It's a phrase I often repeat to the brands I follow, because it's the number one trap that emerging designers fall into.
Calculate the gross margin
The gross margin is the difference between how much you sell a product for and how much did it cost you to produce it?.
Example: You produce a sweatshirt for €25 (fabric, packaging, labels) and sell it for €89. Your gross margin is €64, or 72%. Fantastic, isn't it?
Wait. From that £721, you still have to deduct: product photos, shipping costs, returns, payment fees, marketing, warehouse rent, accountant... In the end, that £721 becomes much less.
| Brand Type | Gross Margin | Notes |
|---|---|---|
| Emerging brands (private labels) | 55-65% | Full control over production |
| Brand established | 40-60% | Economy of scale |
| Luxury (LVMH, Hermès) | 58-68% | High pricing power |
| Reseller/Third party | 25-35% | Compressed margins |
| Fast fashion (Zara) | ~58% | Very loud volume |
⚠️ Warning sign: If your gross margin is below 50%, stop and review your accounts. Either you are selling too low, or you are producing too expensively. In either case, you have a structural problem that no marketing strategy can solve.
The net margin: what matters
The gross margin is just the starter. The main course is the net margin – what you have left after paying for everything: marketing, shipping, returns, rent, software, accountant...
La Industry average? Around 10%. This means that for every €100 in sales, you keep €10 in your pocket. Brands that do really well reach 20%. Those on Amazon, with all the commissions, often stop at 5-15%.
📊 Translated into concrete figures: If your goal is to take home €2,000 per month from your brand, you need to generate around €20,000 in revenue. If you aim to €5,000 “salary”, You need €50,000 in monthly sales. Suddenly the numbers seem bigger, don't they?
Your total operating costs (marketing, logistics, tech, team) should not exceed 30% of turnover. If you're above, you're burning margin. If you're way above, you're burning the business.
How much does it cost to “buy” a customer? (More than you think)
Now let's talk about a number that most emerging designers completely ignore: the customer acquisition cost, or CAC.
The concept is simple: every new customer costs you something. You spent money on advertising on Instagram, you paid an influencer, you invested time in creating content... all of this has a cost. Divide it by the number of customers you acquired, and you get your CAC.
€65 for every single new customer. Every person who buys from you for the first time costs you almost as much as a dinner out for two. Makes you think, doesn't it?
| Benchmark | CAC |
|---|---|
| General e-commerce media | €50-130 |
| Fashion & Accessories (Shopify 2021) | €129 |
| Fashion products (range) | €30-100 |
| Optimised emerging target brands | €40-70 |
Does the customer have a price?
But CAC alone does not tell you whether you are doing well or badly. A CAC of €100 can be excellent or disastrous, depending on how much that customer brings you over time.
The Lifetime Value (LTV) It is the total amount that a customer will spend with you throughout your entire “relationship”.
The Magic Ratio: LTV ÷ CAC
This ratio – how much a customer is worth divided by how much it costs to acquire them – is the most important number in your business. That's what separates brands that thrive from those that struggle.
RED ALERT
Spend what you earn. You are working for free.
Grey Area
You survive, but you don't grow. Margins are too tight.
Minimum Trade Union
Every £1 generates £3. You have room to grow.
Excellent
Healthy business. But if it's too high, you're under-investing.
The healthiest brands recoup their acquisition costs within the first 1-2 months from the first sale.
The conversion rate: why 97 out of 100 people leave
You open Google Analytics, look at the visits to your site, and smile: “Wow, 1,000 people this month!” Then you look at the sales: 25. And the smile fades.
Welcome to the world of conversion rate – the percentage of visitors who actually buy. And in fashion, this percentage is brutally low.
| Category | Conversion Rate |
|---|---|
| Fashion e-commerce media | 2.9-3.3% |
| Top 20% fashion shops | > 3.2% |
| Top 101 TP3T fashion shops | 4.7% |
| Women's clothing | 3.6% |
| Men's clothing | 0.8% |
| Accessories | 7.4% |
| Sportswear | 2.8% |
| Luxury fashion | 0.7-0.8% |
Translated: If you have a fashion e-commerce site, only 3 out of 100 visitors will buy (on average). 97 will leave empty-handed. That's why conversion rate optimisation is crucial.
📊 The accessories convert to 7.4% – more than double the average! Why? One size fits all, often more affordable, easier impulse purchase. If you are launching a brand, consider including accessories in your collection.
A thought-provoking fact: the famous abandoned shopping cart is the norm, not the exception – in US fashion, the 77% of the trolleys is abandoned.
Break-even: when your brand starts to make a profit
“How long does it take before we see profits?”
This is the question I am asked most often. The honest answer? It depends. But based on my experience with hundreds of brands, here is a realistic timeline:
⚠️ Reality check: If someone promises you immediate profits in fashion, they are lying. This is a business that requires patience, capital and strategy. But if done well, it can generate significant margins and a lasting asset of value.
5 strategies to maximise the ROI of your fashion e-commerce business
Now that you know the figures, the question is: How can they be improved in practical terms? Here are the five strategies that made the difference for the brands we followed.
Acquiring a new customer costs 5-7 times more than maintaining an existing one. Yet most brands spend 80% of their budget on acquisition.
- Implement a loyalty programme with points and VIP tiers
- Personalised post-purchase email marketing
- Early access to new collections for existing customers
- Community building on proprietary channels
With a cart abandonment rate of 77%, there is a sea of opportunities:
- Simplified checkout (maximum 3 steps)
- Multiple payment options (Klarna, PayPal, Apple Pay)
- Email retargeting for abandoned shopping carts (within 1 hour)
- Exit-intent pop-up with incentive
Don't put all your eggs in Meta's basket. Advertising costs have increased by 30% YoY.
- SEO and content marketing: lower CAC in the long term
- TikTok: CPC still competitive, organic reach possible
- Micro-influencers: ROI often higher than mega-influencers
- Referral programme: customers acquired with LTV +25%
Operating costs are expected to remain below 30% of revenues. Areas requiring action:
- Logistics: negotiate rates, evaluate fulfilment centres
- Production: realistic minimum orders, no overstock
- Tech: use integrated tools, avoid redundant subscriptions
- Automation: email automation, chatbots for customer service
Sell 1,000 pieces at a margin of 20% is worse to sell 500 pieces at a margin of 50%.
- Premium positioning with strong storytelling
- Smaller but more carefully curated collections
- Made in Italy production as a distinguishing feature
- Controlled scarcity: limited editions, pre-orders, drops
Fast fashion can compete on volume because it has economies of scale that you don't have. Your weapon is perceived value, quality, exclusivity. Don't fight the wrong war.
What will change in 2026?
Before closing, I would like to share some trends that are already influencing the profitability of online fashion brands.
Artificial Intelligence
McKinsey estimates that AI will add 150-275 billion $ to fashion profits over the next 3-5 years. 28% of fashion companies are already using AI in their creative processes. You can use it for copy, images, personalised emails and sales forecasting.
Virtual Try-On
The virtual fitting room market is already worth 3.4 billion $. Size recommendation AI has achieved 95% accuracy. Drastic reduction in returns = higher margins.
Social Commerce
Will reach 821 billion $ in 2025 (+17%). Gen Z is 3.2 times more likely to buy directly from social media. TikTok Shop and Instagram Checkout are concrete opportunities.
The Secondhand Boom
The second-hand market is already worth 260 billion $ and will double by 2030. Over 150 brands have integrated resale sections. Opportunities: take-back and resale programmes with your brand.
📊 Want to know how much YOUR brand can earn?
Our consultants will analyse your project and give you concrete figures. This is not a sales call: it is an hour dedicated to understanding whether your project has the foundations to succeed.
Book your free consultation →FAQ: Frequently Asked Questions about ROI Fashion E-commerce
Example: If you invested €25,000 and after one year you have a net profit of €8,000, your ROI is 32%.
For individual advertising campaigns, use the ROAS: Revenue generated ÷ Advertising expenditure. A ROAS of 4x means that every euro spent generated four euros.
For a complete launch with professional branding, high-quality photography and adequate stock, you can achieve €50.000-70.000.
Remember: Under-capitalising is one of the most common mistakes I see people make. It is better to wait a few months and start with adequate resources.
If you are below 5%, you have a pricing problem, operating costs that are too high, or both. Analyse each expense item and identify where you are losing margin.
Often the problem lies in shipping costs, poorly managed returns, or sub-optimal marketing expenses.
• Invest in SEO and organic content marketing: Lower CAC in the long term, although it requires patience
• Implement referral programmes: Near-zero CAC and customers with LTV higher than 25%
• Optimise your conversion rate: more customers from the same advertising expenditure
• Head alternative channels: TikTok, Pinterest, and micro-influencers often have lower CPCs than Meta.
These times can be significantly shortened if you have a highly differentiated product, a pre-existing community, or an adequate marketing budget. They can be lengthened if you undercapitalise or if your positioning is unclear.
Be wary of anyone who promises immediate profits: is not the reality of the sector.
Foreign consumers, particularly Americans and Asians, are willing to pay a premium of 20-40% for authentic Italian products.
But it must be true and communicated well – simply writing it on the label is not enough. Describe the supply chain, show the workshops, tell stories about the artisan tradition.
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