E-commerce · Economics
True contribution margin by SKU
Published · Reviewed by The Diligence Standard Team · Updated
SKU economics should include every variable cost required to acquire, fulfill and support the order.
Records to reconcile
- SKU sales and discounts
- Landed product cost
- Fees, fulfillment, shipping and advertising allocation
Warning signal
Best-selling SKUs generate little or negative contribution after full variable cost.
Transaction impact
Headline growth may destroy cash and distort the earnings base.
Response
Reprice, renegotiate, discontinue or value the affected earnings conservatively.