What Are Operating Expenses? A Store Owner's Guide

If you already run a store with real orders and real ad spend, you have felt this: your product margin looks healthy, but the bank balance says otherwise. The gap is almost always operating expenses. This guide gives you a precise operating expenses definition, a full list of what is included, and a worked example that shows exactly how they turn a "good" per-order margin into a thin one.

Operating expenses definition

Operating expenses (often shortened to OpEx) are the ongoing costs a business pays to keep running that are not tied to producing a specific unit of product. Rent, wages, utilities, software, and marketing are the textbook examples (AccountingTools).

The key phrase is "not tied to producing a specific unit." That is what separates operating expenses from your cost of goods sold. If a cost scales one-for-one with each order — the blank shirt, the print, the supplier's shipping charge — it is COGS, not an operating expense. If a cost keeps accruing whether you sell one order or a thousand, it is an operating expense.

For an operating store, this distinction is not academic. It changes which lever you pull when margins tighten. Confused about which bucket a cost belongs in? Our cost of goods sold formula walkthrough and is cost of goods sold an expense breakdown draw the exact line.

What is included in operating expenses

Here is what actually shows up as operating expenses for a Shopify or print-on-demand store. Note that COGS (the blank, the print, supplier shipping) is deliberately excluded — that is a separate line above operating expenses.

• Platform subscription — your monthly Shopify plan.
• Marketing and advertising — Meta Ads, Google Ads, influencer fees, email tools. For most stores this is the single largest operating expense.
• Apps and software — review apps, upsell apps, subscription-billing apps, design tools, analytics.
• Payment processing fees — the percentage-plus-flat fee on every transaction, plus dispute and chargeback fees.
• Owner or staff pay — anything you pay yourself or a VA/contractor for support, design, or ops.
• Merchant services and overhead — accounting software, business insurance, a business phone line.

Marketing is an operating expense, not a product cost

This trips up a lot of operators. Ad spend feels like it "belongs" to the sale it generated, so people mentally lump it with COGS. It is not COGS — it is an operating expense, because you are paying to acquire a customer, not to manufacture the item. Keeping it in the operating-expense bucket is what lets you calculate a clean product margin first, then see how much acquisition cost eats.

Payment and dispute fees are operating expenses too

Every card sale carries a processing fee, and disputes carry their own. On Shopify Payments in the US, a chargeback costs a flat fifteen dollars per dispute on top of the clawed-back order amount, refunded only if you win (chargeback.io). Across a month those fees are a real, recurring operating expense — not a rounding error.

Operating expenses vs COGS: the split that decides your profit

Think of your income statement in three stacked layers:

1. Revenue — what customers paid you.
2. Minus COGS — the direct cost of the units you sold. Revenue minus COGS is your gross profit.
3. Minus operating expenses — everything above. Gross profit minus operating expenses is your operating profit.

Most store owners obsess over layer two and barely look at layer three. But a store can have a beautiful gross margin and still lose money if operating expenses outrun it. The whole point of tracking the split is to see both numbers, not just the flattering one. Our unit economics guide shows how these layers compound down to per-order profit, and the wider ecommerce ops economics hub maps how every money leak connects.

Fixed vs variable operating expenses

Operating expenses come in two flavors, and knowing which is which tells you what happens when sales move (NetSuite).

• Fixed operating expenses stay roughly constant no matter how many orders you ship — your Shopify plan, most app subscriptions, insurance. These get cheaper per order as volume rises, because you spread the same dollar over more sales.
• Variable operating expenses move with activity — ad spend, payment processing fees, per-order transaction charges. These stay roughly the same per order no matter how much you scale.

The practical takeaway: growth helps you with fixed costs and does nothing for variable ones. If your problem is a bloated ad budget (variable), selling more will not save you — you have to fix the efficiency. If your problem is a stack of app subscriptions (fixed), more volume genuinely dilutes the pain.

Worked example: operating expenses on a real store month

Say you run a store doing 340 orders a month at a $31 average order value, with $2,800/month in Meta spend. Here is how operating expenses reshape the picture.

Start with the top two layers (per order):

• AOV: $31.00
• COGS (blank + print + supplier shipping): $13.50
• Gross profit per order: $31.00 − $13.50 = $17.50

That $17.50 looks great — a 56% gross margin. Now bring in the monthly operating expenses:

Revenue is 340 × $31 = $10,540. Gross profit is 340 × $17.50 = $5,950. Now subtract operating expenses:

$5,950 gross profit − $3,677 operating expenses = $2,273 operating profit.

Per order, that is $2,273 ÷ 340 = $6.68. Your gross profit per order was $17.50 — operating expenses quietly ate $10.82 of every order, more than half of it to ads. That is the number that never shows up when you only look at product margin. Once you have this figure, recording cost of goods sold correctly is what keeps the two layers from bleeding into each other in your books.

How to actually get operating expenses under control

You do not cut operating expenses by staring at a spreadsheet once a quarter. A few habits that work for operating stores:

• Separate variable from fixed first, so you know whether volume or efficiency is your lever.
• Attribute ad spend to true per-order profit, not to revenue or ROAS. A campaign can look fine on ROAS and still lose money once COGS and fees come out.
• Audit the app stack quarterly — subscriptions are the easiest operating expense to forget and the easiest to cut.
• Track payment and dispute fees as their own line so they do not hide inside "misc."

This is precisely the arithmetic PodVector AI's Victor is built to run. Victor is an AI employee — not a dashboard — that connects to Shopify, Meta Ads, Google Ads, and your POD supplier (Printify, Printful, or Gelato), then computes your true per-order profit with COGS, fees, and ad spend all subtracted, and delivers the reports to your Google Drive. Every action he takes is approval-gated, so nothing changes without your say-so. Put Victor on your store's numbers and see the operating-profit picture your product margin hides.

FAQs

What are operating expenses in simple terms?

Operating expenses are the recurring costs of running your business that are not the direct cost of the product you sell. For a store, that means your platform subscription, ad spend, apps, software, payment fees, and any staff or owner pay — everything it takes to keep the lights on and orders flowing, separate from making the item itself.

What is the difference between operating expenses and cost of goods sold?

COGS is the direct, per-unit cost of the products you actually sold — the blank, the print, the supplier's shipping. Operating expenses are everything else it takes to run the business, and they do not scale one-for-one with each order. Revenue minus COGS is gross profit; gross profit minus operating expenses is operating profit.

Is marketing an operating expense?

Yes. Advertising and marketing are operating expenses, not cost of goods sold. Even though a specific ad may have driven a specific sale, you are paying to acquire a customer, not to manufacture the product. Keeping ad spend in the operating-expense bucket lets you see product margin and acquisition cost as two separate numbers.

What is included in operating expenses for an online store?

The common line items are: your Shopify (or other platform) subscription, marketing and ad spend, app and software subscriptions, payment processing and dispute fees, owner or contractor pay for support and design, and general overhead like accounting software and insurance. It excludes COGS, which sits on its own line above operating expenses.

Are payment processing fees operating expenses?

Yes. Card processing fees, transaction fees, and chargeback or dispute fees are all operating expenses. They recur with every sale and every dispute, and for a busy store they add up to a meaningful monthly cost — worth tracking as their own line rather than burying them in miscellaneous.

Are operating expenses fixed or variable?

Both. Fixed operating expenses (your platform plan, most app subscriptions, insurance) stay constant regardless of sales volume and get cheaper per order as you grow. Variable operating expenses (ad spend, payment fees) move with your activity and stay roughly constant per order. Knowing which is which tells you whether scaling or cost-cutting is the right fix.