If you already run a store with real orders and real ad spend, you have probably stared at a bank balance that does not match what your revenue "should" have left you. The gap is almost always operating expenses. This guide gives you a precise definition, a full list of what counts, the lines that get miscategorized, and a worked example on real operating numbers.
What are operating expenses?
Operating expenses (often shortened to OpEx) are the costs a business incurs through its normal, day-to-day operations. They keep the lights on and the orders flowing, but they are not the direct cost of producing what you sell.
Think of it as the difference between the shirt and the store. The blank shirt, the print, and the supplier shipping fee are the cost of the product. The Shopify subscription, the Meta ads that found the buyer, and the email app that emailed them are operating expenses.
The Corporate Finance Institute defines operating expenses as the costs tied to a company's primary revenue-generating operations, excluding financing and investing activity. That last part matters: a loan payment or a stock purchase is not an operating expense, because it is financing or investing, not operating.
Operating expenses on the income statement
On an income statement, operating expenses have a fixed home. Revenue sits at the top. Subtract cost of goods sold and you get gross profit. Subtract operating expenses from gross profit and you get operating income.
That ordering is the whole point. As Corporate Finance Institute lays out the structure, operating expenses land after gross profit, and what is left after them is your operating income — the cleanest measure of whether the business itself makes money.
So the flow reads:
- Revenue
- − Cost of goods sold (COGS)
- = Gross profit
- − Operating expenses (OpEx)
- = Operating income
If your gross profit looks healthy but your operating income is thin or negative, your operating expenses are eating the business. That is exactly the trap covered in our piece on negative unit economics.
A list of operating expenses for an online store
Here is what operating expenses include for most store owners. General-business guides list the same broad buckets; PayPal's operating-expenses overview names employee compensation, facility leasing, utilities, software licenses, insurance, promotional activity, equipment upkeep, and business permits. Translated to a store you actually run, that list of operating expenses looks like this:
- Platform and hosting — your Shopify subscription and any theme or plan upgrades.
- Payment processing fees — the percentage and per-transaction cut taken on every sale.
- Advertising and marketing — Meta Ads, Google Ads, influencer fees, promo discounts you fund.
- Software and apps — email tools like Klaviyo, design tools, review apps, analytics.
- Labor and services — virtual assistants, contractors, a bookkeeper, customer-support help.
- Rent and utilities — if you keep an office or studio space.
- Insurance and licenses — business insurance, an LLC or seller's permit renewal.
- Bank and admin fees — chargeback fees, monthly account fees, currency conversion.
Note what does not appear: the blank product, the print cost, and the supplier's shipping charge. Those are COGS, and lumping them into operating expenses is the most common bookkeeping mistake store owners make.
What operating expenses do NOT include
Two categories get confused with operating expenses constantly. Getting them wrong distorts every margin number you look at.
Cost of goods sold (COGS)
COGS is the direct cost of the thing you sold. For a print-on-demand seller, that is the blank garment, the printing, and the fulfillment shipping your supplier bills you. It scales one-for-one with each order.
Operating expenses do not scale that cleanly — your Shopify bill is the same whether you ship ten orders or a thousand. If you are unsure where a cost belongs, our guides on how cost of goods sold is handled in QuickBooks and on recording cost of goods sold walk through the split with examples.
Capital expenditures (CapEx)
A capital expenditure is a one-time purchase of a long-lived asset — a heat press, a laptop, a camera for product photos. You use it for years, so its cost is spread over time through depreciation rather than expensed all at once.
The tell: buying the machine is CapEx; repairing and maintaining it is an operating expense. The same distinction applies to space — if you rent, that is operating; property costs behave differently, which we cover in rental property operating expenses.
Worked example: one operator's monthly operating expenses
Say you run a POD store doing 340 orders a month at a $31 average order value. That is $10,540 in monthly revenue. Here is what your operating expenses realistically look like.
The Shopify figures below are current published rates: the Basic plan is $39/month billed monthly and charges 2.9% + 30¢ per online card transaction. The processing line applies that rate to your volume; the ad spend, apps, and services are example inputs for a store this size.
| Operating expense | Monthly amount |
|---|---|
| Shopify Basic subscription | $39 |
| Payment processing (2.9% of $10,540 + $0.30 × 340) | $408 |
| Meta Ads spend | $2,800 |
| Apps & software (Klaviyo, design, reviews) | $150 |
| Labor & support (part-time VA) | $400 |
| Total operating expenses | $3,797 |
Now watch what that does. Your operating expense ratio is $3,797 ÷ $10,540 = 36% of revenue — before a single dollar of product cost is counted. If your POD product cost runs another 40% of revenue, you are already at 76% of every dollar spent, leaving roughly 24% before returns, chargebacks, and the odd refund chip away at it.
That is why a store can post $10,000 months and still feel broke. The revenue is real; the operating expenses are just as real, and they hide across five different logins.
Why operating expenses decide whether you're actually profitable
Most articles stop at the definition. The part they skip is that operating expenses are where profit quietly leaks — and they are scattered on purpose across Shopify, your ad accounts, and your app subscriptions, so no single screen shows the total.
Your ad platform shows spend but not fees. Shopify shows fees but not ad spend. Your app bills arrive by email. Adding them up by hand, every month, is the work almost nobody does consistently.
This is the problem PodVector AI built Victor to solve. Victor is an AI employee, not a dashboard — he connects to your live store and ad accounts (Shopify, Meta Ads, Google Ads, Printify, Printful, Gelato, and Klaviyo), computes your true per-order profit after both COGS and operating expenses, and delivers the report to your Google Drive. Every write action he takes is approval-gated, so you stay in control of anything that changes.
Understanding the full economics of running an ecommerce operation starts with knowing which costs are operating expenses and which are not. Once the categories are clean, the profit math finally tells the truth.
FAQs
Are payment processing fees an operating expense?
Yes. The percentage and per-transaction fee your processor takes on every sale is an operating expense, not COGS. On the Shopify Basic plan that fee is 2.9% + 30¢ per online card transaction, which on a few hundred orders a month adds up to real money. Track it as its own line so you can see how much of each sale the processor keeps.
Is advertising considered an operating expense?
Yes. Ad spend on Meta, Google, or anywhere else is a marketing operating expense. It is one of the largest OpEx lines for most stores and often the most variable, since you can turn it up or down month to month. Because it does not sit inside your product cost, it is easy to forget when you eyeball margins.
What is the difference between operating expenses and COGS?
COGS is the direct cost of the product you sold — for POD, the blank item, the print, and supplier shipping. Operating expenses are everything else it takes to run the business: subscriptions, ads, apps, fees, and labor. COGS scales with each order; most operating expenses stay roughly fixed regardless of order count.
Do marketplace fees like Etsy's count as operating expenses?
Yes. If you sell on Etsy alongside your own store, its listing, transaction, and Offsite Ads fees are operating expenses. Those combined fees can reach roughly 10–13% of every sale, and higher on ad-attributed orders, which is a major reason sellers weigh moving volume to an owned store. Treat every platform's cut as its own operating expense line.
Is buying equipment an operating expense?
No. A one-time purchase of a long-lived asset — a heat press, a computer, a camera — is a capital expenditure, not an operating expense. You spread its cost over time through depreciation. The ongoing repair and maintenance of that equipment, however, is an operating expense.
How do I find my total operating expenses each month?
Add up every recurring cost that is not product cost: platform subscription, processing fees, ad spend, app and software bills, and any labor or services. The hard part is that these live in separate accounts and bills. Pulling them into one number — either by hand each month or by connecting your accounts to a tool that computes it for you — is what turns a revenue figure into an honest profit figure.