Most shop owners running ads on imported 1688 goods know their products "need a high ROAS" but have no specific number in mind. The result is budget decisions based on gut feel, pausing campaigns when ROAS looks low without knowing how low is actually losing money, and keeping campaigns that feel profitable but are quietly eating into capital. This is about converting margin into a concrete minimum ROAS threshold per SKU, and understanding why that number differs between products.
ROAS alone does not tell you whether you are profitable
ROAS (return on ad spend) measures revenue generated per unit of ad spend. A ROAS of 3 means every dollar in ads brings back three dollars in revenue. The number is easy to read, which is why it gets used constantly. But it says nothing about profit, because revenue is not profit.
A SKU selling for 300,000 VND with a full landed cost of 240,000 VND has a gross margin of only 20 percent. A different SKU at the same price with a landed cost of 150,000 VND has a gross margin of 50 percent. These two SKUs need very different break-even ROAS numbers when running ads. Using a single ROAS target for both means your measurement is wrong for at least one of them.
The formula: margin to break-even ROAS
Break-even ROAS is the point where ad spend exactly equals the gross profit left after deducting landed cost and platform fees. At break-even you are not making money, but you are not losing it either.
Step 1: Calculate gross margin before ads.
Take your selling price and subtract everything except ad spend: full landed cost (product price on 1688, domestic China freight to the consolidation warehouse, freight to Vietnam, customs and handling, order agent fee if applicable, and a shrinkage allowance for defects), plus the platform fee for the channel you are selling on.
```
Gross margin before ads (%) = (Selling price - Full landed cost - Platform fee) / Selling price x 100
```
Example: selling price 300,000 VND, full landed cost 190,000 VND, platform fee around 9 percent (27,000 VND). Gross margin before ads: (300,000 - 190,000 - 27,000) / 300,000 = roughly 28 percent.
Step 2: Calculate break-even ROAS.
```
Break-even ROAS = 1 / Gross margin before ads (as a decimal)
```
With a 28 percent margin (0.28): break-even ROAS = 1 / 0.28 = approximately 3.6.
This means: if your campaign ROAS is exactly 3.6, ad spend equals gross profit. Below 3.6, the campaign loses money. Above 3.6, you are generating real profit.
Why break-even ROAS differs per SKU
The threshold is a direct function of gross margin before ads. Thinner margin means a higher threshold and a smaller margin of error.
Three practical bands that come up often with 1688 imports:
Thin margin (below 20 percent). Highly competitive goods, selling price close to landed cost, platform fee eating a large share. Break-even ROAS typically runs between 5 and 8. That means for every 1,000 VND in ads, you need 5,000 to 8,000 VND in revenue just to break even. One underperforming campaign period and the profit is gone. Low-ticket 1688 items (under 50 yuan), sold on crowded Shopee or TikTok Shop listings, frequently land here.
Mid margin (20 to 35 percent). Products with some differentiation or a less saturated niche, pricing not yet compressed. Break-even ROAS typically runs between 3 and 5. This is the most common band for 1688 operators who have done their sourcing homework, and campaigns running ROAS 4 to 5 usually generate positive net profit if gross margin sits at 25 to 30 percent.
Thick margin (above 35 percent). Niche products, well-constructed bundles, or goods where you control a meaningful spread between purchase price and selling price. Break-even ROAS can be as low as 2.5 to 3. In this band even a weak campaign rarely loses heavily, and you have room to experiment with targeting and creatives.
Where 1688 imported goods lose margin without the owner noticing
Sellers frequently undercount landed cost, which makes their calculated gross margin higher than reality and their assumed break-even ROAS lower than it actually is.
Common items that get left out:
- Volumetric (dimensional) weight freight. Carriers charge whichever is higher: actual weight or volumetric weight. A bulky, light item like a foam cushion or display stand can weigh 0.5 kg on a scale but bill at 1.8 kg by volume. The freight line on your cost sheet ends up much higher than the estimate.
- Order agent service fee. If you buy through an intermediary who handles purchasing, consolidation, and shipping logistics, their fee typically runs a few percent on the goods value. Across a decent-sized order it adds up.
- Defect shrinkage. Most 1688 shipments carry some defect rate, especially for fragile items or small electronics. If you do not account for this in your unit cost, you are absorbing the loss in your margin without knowing it.
- Platform promotion mechanics. TikTok Shop and Shopee run flash sales, voucher campaigns, and platform-funded subsidies that sometimes require the shop to absorb a discount or pay a higher commission rate. If your ROAS is calculated against the listed price but your actual sales come through at a discounted price, your true revenue per unit is lower.
- Return costs. TikTok Shop in particular has a non-trivial return rate in some categories. The cost of each return (two-way shipping, damaged or unsalable goods) should be averaged into per-unit cost, not treated as an occasional separate line.
Setting a practical target, not just a floor
Knowing break-even ROAS is the starting point. The more useful number is the ROAS you need to hit your target net margin.
If you want at least 15 percent net margin on revenue after ads, the formula adjusts:
```
Target ROAS = 1 / (Gross margin before ads - Target net margin rate)
```
Example: 28 percent gross margin before ads, target net margin 15 percent. Target ROAS = 1 / (0.28 - 0.15) = 1 / 0.13 = approximately 7.7.
So for this SKU: below 3.6 is a loss. Between 3.6 and 7.7 is gross-profit positive but not hitting your net target. Above 7.7 hits the goal.
These three thresholds (break-even, floor, full target) give you a practical scale to evaluate any campaign without relying on instinct. A campaign sitting between break-even and target gets optimization work. A campaign running below break-even gets cut or restructured, not monitored.
A worked comparison: two SKUs from the same 1688 shipment
Suppose you import two products in the same order, both selling at 250,000 VND on TikTok Shop.
SKU A. Full landed cost 175,000 VND, platform fee 10 percent (25,000 VND). Gross margin before ads: (250,000 - 175,000 - 25,000) / 250,000 = 20 percent. Break-even ROAS = 1 / 0.2 = 5.0.
SKU B. Full landed cost 130,000 VND, same platform fee 25,000 VND. Gross margin before ads: (250,000 - 130,000 - 25,000) / 250,000 = 38 percent. Break-even ROAS = 1 / 0.38 = 2.6.
Same selling price, but SKU A needs a ROAS of 5.0 to break even while SKU B only needs 2.6. If your campaigns are running at ROAS 3.5 for both: SKU B is generating gross profit, SKU A is losing money on every order. If you are using a shared ROAS threshold of 3.0 to judge both, you will think both are acceptable.
This is also why looking at account-level ROAS misses the picture. Account ROAS is a weighted average across all SKUs. Inside that average, a strong SKU at ROAS 6 can mask a weak SKU running at ROAS 2 that loses money on every order it generates.
Bottom line
Break-even ROAS is not a fixed number that applies across your whole store or even across the same price point. It depends on the gross margin before ads for each specific SKU, and that margin depends on full landed cost, not just the 1688 purchase price. The practical move: calculate gross margin before ads for each SKU you are running ads on, convert it to a break-even ROAS, add a target ROAS above that, and use both numbers instead of gut feel when evaluating campaigns. A SKU stuck between break-even and target gets optimization work. A SKU running below break-even gets reviewed immediately.