How to Set the Right ROAS Target for Your Shopify Store (Before You Touch Your Bids)

By Stan Tscherenkow | Founder, Stan Consulting LLC, Roseville CA MBA, Universität Trier (Germany) · Marketing, Loughborough University (UK) · 15+ years across US, Europe & Asia LinkedIn · stantscherenkow.com

ROAS — Return on Ad Spend — is the number every Shopify store owner watches. It's the ratio of revenue generated from advertising to the amount spent on advertising. Spend $1,000, generate $4,000 in revenue: that's a 4x ROAS, or 400%.

Most Shopify store owners know what their ROAS is. Very few know what it should be.

That distinction — between the ROAS you're getting and the ROAS you actually need to be profitable — is where advertising budgets quietly disappear. I've audited Shopify ad accounts where campaigns were reporting a 5x ROAS and the store was still losing money on every sale. I've seen campaigns paused because ROAS dropped below an arbitrary 3x target, when the correct minimum for that store's margins was actually 2.1x and the campaigns were profitable the entire time.

Arbitrary ROAS targets — numbers picked because they sound good, copied from an industry benchmark, or suggested by a Google rep — are one of the most common and costly mistakes in Shopify advertising. This guide gives you the margin-based framework to calculate the specific ROAS target your store needs, explains why the number changes by product and channel, and shows how to use it to make better bidding decisions in Google Ads.

For the broader PPC strategy context — how ROAS targets integrate with campaign structure, feed optimization, and budget allocation for California ecommerce stores — see our complete Shopify PPC guide for Sacramento and Bay Area stores →.

Why "Industry Benchmark ROAS" Is the Wrong Starting Point

Search "good ROAS for ecommerce" and you'll find articles citing 4x as the standard benchmark. Some say 3x. Some say 6x for luxury goods. Some say it depends on your category.

All of this is marginally useful and primarily irrelevant to your specific store, because ROAS benchmarks are built on averages across stores with wildly different cost structures. A Shopify store dropshipping products with a 15% gross margin needs a fundamentally different ROAS target than a Shopify store selling private-label products with a 65% gross margin — even if they're in the same product category, even if their average order values are identical.

The only ROAS target that matters is the one that keeps your specific store profitable after accounting for your specific costs. That number is derived from your gross margin, not from an industry report.

Here's the formula.

The Break-Even ROAS Formula

Break-even ROAS is the minimum ROAS at which your advertising revenue covers your cost of goods and your ad spend, resulting in zero net gain or loss from the advertising activity — before accounting for overhead, fulfillment, and other operating costs.

Break-even ROAS = 1 ÷ Gross Margin

Where gross margin is expressed as a decimal.

Example:

Your Shopify store sells a product for $100. Your cost of goods (manufacturing, purchasing, or landed cost) is $35. Your gross margin is ($100 - $35) ÷ $100 = 65%, or 0.65.

Break-even ROAS = 1 ÷ 0.65 = 1.54x

This means if your Google Ads campaigns generate $1.54 in revenue for every $1 spent on ads, you are at break-even on gross margin. The ad cost is exactly covered by the margin on the sale.

But break-even isn't profitable. You still have overhead — Shopify fees, fulfillment costs, packaging, customer support, returns processing, your own time. These need to be covered too.

The Profitable ROAS Formula: Adding Your Operating Costs

To calculate a ROAS target that produces actual profit — not just covers cost of goods — you need to include your total cost structure as a percentage of revenue.

Total Cost Rate = COGS% + Fulfillment% + Platform Fees% + Overhead%

Then:

Profitable ROAS Target = 1 ÷ (1 - Total Cost Rate)

Working through a real Shopify example:

Cost Component% of RevenueCost of Goods Sold35%Fulfillment & Shipping8%Shopify Fees (2.9% + $0.30 per transaction)~3%Returns & Refunds (average)3%Overhead (prorated: staff, tools, rent)6%Total Cost Rate55%

Profitable ROAS Target = 1 ÷ (1 - 0.55) = 1 ÷ 0.45 = 2.22x

At a 2.22x ROAS, every dollar spent on advertising generates $2.22 in revenue, which — after all costs — leaves a net profit margin of approximately zero. This is your true break-even on full costs.

To set a meaningful profit target, add your desired net margin on top:

If you want a 15% net profit margin on ad-attributed revenue:

Target ROAS = 1 ÷ (Gross Margin - Desired Net Margin) = 1 ÷ (0.65 - 0.15) = 1 ÷ 0.50 = 2.0x

Wait — that's lower? Yes. A lower ROAS target in this framework doesn't mean less profit. It means you're setting a minimum that allows you to scale profitably. If your ROAS is above 2.0x on a store with these economics, you're making money. If it's below 2.0x, you're not. The number is calibrated to your actual margins, not to an industry average.

Why Your ROAS Target Should Differ by Product

The formula above gives you a store-level ROAS target. But if your Shopify catalog has products with meaningfully different margins — which most stores do — then applying a single ROAS target across all campaigns is leaving money on the table on your high-margin products and potentially losing money on your low-margin ones.

Example: Two products, one store

Product AProduct BSale price$120$45Cost of goods$28$29Gross margin77%36%Break-even ROAS1.30x2.78xProfitable ROAS target (full costs)1.85x4.20x

If you're running a single Shopping campaign with a target ROAS of 3.0x, you're being overly conservative on Product A (which can profitably scale at 1.85x) and potentially too aggressive on Product B (which needs 4.20x to be profitable after all costs).

The correct approach: segment your Google Ads campaigns by product margin tier, and set ROAS targets accordingly. This is exactly why custom labels in your Google Merchant Center feed matter — as covered in our Shopping feed optimization guide →. Label products "high-margin," "mid-margin," and "low-margin," then run separate campaigns or ad groups for each tier with appropriate ROAS targets.

High-margin products get aggressive bidding with lower ROAS targets. Low-margin products get conservative bidding with high ROAS targets. The result is more revenue from your best products and protected profitability on your margin-thin ones.

ROAS Targets by Campaign Type

Different campaign types in a Shopify Google Ads account naturally produce different ROAS levels — and this is expected, not a problem. Understanding the normal ROAS range for each campaign type prevents you from pausing campaigns that are working correctly or over-investing in campaigns that only look like they're working.

Branded Search campaigns: Typically produce the highest reported ROAS in the account — often 8x to 20x or more. This is largely because branded searches convert at extremely high rates (people looking for your specific store are already buyers). However, the true incrementality of branded campaigns is lower — many of these buyers would have found you organically. Don't use branded campaign ROAS as your benchmark for evaluating non-branded campaigns.

Standard Shopping campaigns: The most accurate ROAS signal for prospecting performance. Expected range for well-optimized accounts: 3x–7x depending on margin and category competitiveness. This is the number to compare against your profitable ROAS target.

Performance Max campaigns: Often reports the highest ROAS after branded Search — but this number is inflated by branded query absorption and view-through conversion attribution. As discussed in our Performance Max guide →, PMax ROAS needs to be evaluated alongside your branded Search and standard Shopping performance to get an accurate picture. A PMax ROAS 20–40% above your standard Shopping ROAS is normal. A PMax ROAS 200% above Shopping almost always indicates attribution inflation.

Dynamic remarketing campaigns: Should be evaluated on a blended basis with the prospecting campaigns they support, not in isolation. Remarketing campaigns naturally show high ROAS because they reach people who already visited your store and are more likely to convert. But that ROAS is partly credited to the prospecting campaigns that drove the original visit. Evaluate remarketing efficiency, not remarketing ROAS in isolation.

The Average Order Value Factor

ROAS targets are revenue-based, which means average order value (AOV) directly affects how achievable your target is.

A store with a $200 AOV has more room to spend per click than a store with a $25 AOV targeting the same ROAS. Here's why this matters practically:

If your profitable ROAS target is 3.0x and your AOV is $200, you can afford to spend up to $66.67 per conversion while hitting your target. At typical Google Shopping CPCs of $0.80–$2.50 for most product categories, that's 27–83 clicks to generate one conversion — a conversion rate of 1.2–3.7%, which is achievable for most well-set-up Shopify stores.

If your profitable ROAS target is 3.0x but your AOV is $25, you can afford to spend only $8.33 per conversion. At the same CPCs, you need to convert 1 in 3 to 1 in 10 clicks — a 10–33% conversion rate. That's not realistic for cold traffic. The math simply doesn't work at low AOV with high ROAS targets.

The implication: if your store has a low AOV (under $40), ROAS-based bidding is often not the right strategy. Cost-per-acquisition (CPA) bidding against a target CPA calibrated to your margin is more appropriate, and you should focus significant energy on average order value improvement — bundles, upsells, volume discounts — before scaling paid traffic.

This is one of the frameworks we apply in the first 30 days of every Shopify PPC engagement at Stan Consulting. AOV is not a marketing metric. It's a unit economics metric that determines whether your business model can support paid acquisition at all.

New vs. Returning Customer ROAS: The Metric Most Stores Miss

One of the most sophisticated ROAS refinements — used by the best-performing Shopify stores but rarely discussed in standard PPC guides — is differentiating ROAS targets for new customer acquisition versus returning customer re-purchase.

The logic is straightforward but its implications are significant:

A new customer acquired for the first time has a lifetime value (LTV) beyond their first order. If your average customer purchases 2.3 times over their lifetime with an AOV of $120, their LTV is $276 — even though their first order is only $120. Evaluating new customer acquisition on ROAS based purely on the first-order revenue systematically undervalues new customer campaigns and leads to under-investment in acquisition.

A returning customer re-purchasing has lower acquisition cost (they already know you) but limited marginal LTV contribution (you've already captured most of their relationship value). Evaluating repeat purchase campaigns on the same ROAS target as new acquisition over-values them comparatively.

The practical application:

If you have sufficient purchase history in your Shopify analytics to calculate LTV by acquisition cohort, set two ROAS targets:

• New customer ROAS target: Lower (more lenient), based on LTV rather than first-order revenue. If your LTV:CAC ratio target is 3:1 and your LTV is $276, your target cost of acquisition is $92. If AOV is $120, your first-order ROAS target can be as low as 1.3x — you'll make the rest back on repeat purchases.

• Returning customer ROAS target: Higher (more conservative), based on single-order profitability only, since LTV has already been captured.

This framework requires knowing your LTV, which requires at minimum 6–12 months of Shopify purchase history by cohort. If you're earlier stage, use a conservative blended target until the data accumulates. But keep this distinction in mind — it becomes increasingly important as your store matures.

Setting ROAS Targets in Google Ads: The Practical Steps

Once you've calculated your ROAS targets using the framework above, here's how to implement them in your Shopify Google Ads account:

Step 1: Start with manual CPC or Maximize Clicks for the first 30 days. Google's automated bidding strategies (Target ROAS, Target CPA) require a minimum of 30–50 conversions in the past 30 days to optimize effectively. Launching a new campaign with Target ROAS from day one on a fresh account puts Google's algorithm in a permanent learning phase with insufficient data. Start manual, collect data, then switch.

Step 2: Set Target ROAS in Google Ads. Navigate to your campaign → Settings → Bidding → select "Target ROAS." Enter your calculated target as a percentage (a 3.0x ROAS = 300%). Google will then optimize bids to achieve that average across the campaign.

Step 3: Don't set your target too tight. If your calculated profitable ROAS target is 2.5x, don't enter 250% into Google Ads. Set it at 220–230%. This gives the algorithm room to find volume while staying close to your profitability threshold. An overly tight ROAS target reduces impression share as Google's system becomes too conservative about which auctions to enter.

Step 4: Review weekly, adjust monthly. ROAS fluctuates — seasonality, competition, feed changes all affect it week to week. Evaluate performance over 30-day rolling windows, not weekly snapshots. Adjust target ROAS by no more than 10–15% at a time to avoid triggering a new learning phase.

Step 5: Segment by margin tier using custom labels. As described earlier, your high-margin products get lower ROAS targets and more aggressive bidding. Your low-margin products get higher ROAS targets and conservative bidding. This segmentation — enabled by custom labels in your Merchant Center feed — is what separates accounts that scale profitably from accounts that hit a ceiling.

A Note on International ROAS Benchmarks

Having managed Shopify-equivalent ecommerce campaigns in German, UK, and Asian markets before working extensively with California stores, one pattern stands out: European ecommerce operators generally have a more rigorous relationship with unit economics than their US counterparts.

In competitive European markets — particularly Germany, where comparison shopping culture is strong and return rates in some categories approach 40% — ecommerce operators have been forced to build precise, margin-based ROAS targets out of necessity. There's simply no room for the "let's aim for 4x and see what happens" approach when your return rate alone can swing your effective gross margin by 10–15 percentage points.

That discipline transfers directly to California ecommerce. The stores that scale profitably aren't the ones with the biggest budgets or the most sophisticated campaign structures. They're the ones that know exactly what their numbers need to be before they spend the first dollar — and build their campaigns around those numbers from day one.

If you want to run your campaigns with that level of precision, it starts with the calculation above, not with a benchmark from an industry report.

Frequently Asked Questions

What is a good ROAS for a Shopify store? There is no universal answer — the right ROAS for your store is the one derived from your gross margin and full cost structure. Using the formula in this guide: Break-even ROAS = 1 ÷ Gross Margin. A store with 60% gross margin needs at minimum 1.67x ROAS to cover cost of goods. Adding fulfillment, fees, and overhead typically brings the profitable target to 2.5x–3.5x for most Shopify stores. Stores with margins below 40% need ROAS targets of 3.5x or higher to be viable with paid advertising.

My Google Ads is reporting 6x ROAS but my store isn't profitable. How? This is more common than it should be. The most likely causes: (1) Google is counting assisted or view-through conversions that inflate the number — check whether you're on "All Conversions" rather than "Conversions" in your reporting column; (2) PMax or branded campaigns are absorbing credit for organic and direct traffic; (3) your COGS and overhead are higher than your ROAS calculation assumes. Run the margin-based formula in this guide against your actual financials and compare the result to your reported ROAS.

Should I use Target ROAS or Target CPA bidding for my Shopify store? For stores with consistent AOV, Target ROAS is generally better — it optimizes for revenue relative to spend, which aligns with your margin. For stores with highly variable AOV (some orders $30, some $300), Target CPA can be more stable because it's optimizing for a fixed cost per transaction rather than a revenue ratio. For low-AOV stores (under $40 average), Target CPA is almost always the right choice. For subscription products where the value is in LTV not first-order revenue, CPA is also typically more appropriate.

How do I handle ROAS targets during seasonal sales (Black Friday, holiday)? During promotional periods, your effective margin changes because you're selling at a discount. If you typically run at 40% gross margin and a Black Friday sale reduces effective margin to 25%, your break-even ROAS rises from 2.5x to 4.0x. Either adjust your ROAS target up accordingly, accept lower profitability during the promotional period as a strategic investment in new customer acquisition, or set a firm CPA cap to prevent overspending on heavily discounted products.

My ROAS target calculation gives me 1.8x. My agency says I should aim for 4x. Who is right? Run the math together. Ask your agency to show you the margin calculation that supports their 4x recommendation for your specific store. If they can't derive the 4x from your actual gross margin and cost structure, the 4x is a benchmark from somewhere else, not a target calibrated to your business. A 1.8x profitable ROAS is entirely legitimate for a high-margin, low-overhead Shopify business. Chasing 4x on a store with 1.8x break-even would mean leaving profitable revenue on the table — pausing campaigns that are making money because they don't hit an arbitrary threshold.

Ready to Build a Shopify PPC Account Around Your Real Numbers?

If you want your Google Ads campaigns structured around your actual margins — not industry benchmarks, not what a Google rep recommended — book a 15-minute fit check with Stan Consulting →

We work with Shopify stores across Sacramento, the Bay Area, Roseville, and California to build PPC campaigns where every bid decision is anchored to real unit economics.

Stan Tscherenkow is the founder of Stan Consulting LLC, based in Roseville, CA. He holds an MBA from Universität Trier (Germany) and a marketing degree from Loughborough University (UK), and has 15+ years of experience in marketing consulting across the US, Europe, and Asia. Connect on LinkedIn or visit stantscherenkow.com.