Question 1

What are unit economics for eCommerce?

Accepted Answer

Unit economics for eCommerce describes the profitability of a single unit of sale or a single customer, stripped back to the most relevant metrics. Key unit economics include: gross margin per unit, contribution margin after fulfilment and returns, customer acquisition cost (CAC), average order value (AOV), repeat purchase rate and customer lifetime value (LTV). These metrics determine whether your business model is fundamentally profitable at scale.

Question 2

How do you calculate true product profitability for eCommerce?

Accepted Answer

True product profitability for eCommerce requires a fully-loaded cost model. This means starting with COGS, then adding: inbound freight and duty, warehousing and pick-pack costs, outbound shipping costs, returns and restocking, marketplace or platform fees, and a marketing cost allocation. Only with all these costs included can you accurately determine which SKUs are driving profit and which are destroying it.

Question 3

My revenue is growing but margins are declining. Why?

Accepted Answer

This is one of the most common challenges in eCommerce. Possible causes include: growing into lower-margin product lines or channels; increasing customer acquisition costs as markets mature; higher fulfilment costs from expanded geographic reach; higher return rates on growth products; price promotions eroding average order value; or simply growing into an unprofitable mix of customers, products and channels. A profitability review diagnoses the specific cause for your business.

Profitability Intelligence for eCommerce Businesses

SKU Profitability Analysis

Customer LTV & Profitability

Channel Margin Analysis

Unit Economics Modelling

FAQ — eCommerce Finance

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