Journal
ProductsAugust 11, 20269 min read
How to calculate product-level profitability
Best sellers are not always the products that create the most cash. Product-level profitability connects selling price with every variable cost attached to that item.
Start with net product revenue
Allocate discounts to line items and match product refunds to the original sale. That creates a realistic revenue base for each SKU.
Add direct and allocated costs
Include unit cost, fulfilment, payment fees and an explicit method for allocating advertising spend. Consistency is more valuable than false precision.
Turn the result into action
Use margin and total contribution together. A high-margin product with little volume and a lower-margin bestseller answer different operating questions.
See these metrics with your own store data.
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