Calculate the true variable cost
Include purchase or production cost, packaging and other costs directly caused by the order.
If inbound freight is meaningful, allocate it consistently across inventory.
Add channel costs
Include payment processor fees, subsidized shipping, marketplace fees if applicable, promotions and a reasonable allowance for returns or support issues.
Use the fees from your actual providers instead of copying a generic rate from another business.
Test discounts before publishing them
Model the order after a coupon, free shipping or bundle discount.
A promotion that increases conversion can still be unprofitable if the contribution margin disappears.
Related guides
View all →Frequently asked questions
Is there one ideal profit margin for e-commerce?
No. Margin needs vary by category, return rate, inventory risk, fulfillment cost and customer acquisition cost.
Should I include Stripe processing fees in pricing?
Treat the actual fees in your Stripe merchant agreement as a variable cost when evaluating order profitability.
Should sales tax be treated as profit?
No. Tax handling depends on the merchant obligations and jurisdiction and should be separated from operating margin analysis.
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