The true margin on a retail sale: stock, returns and the cost of fulfilment
A product that sells well can still lose money once returns, discounts, delivery and platform fees are counted. How to see the real margin, product by product.
Gross margin on a product page is the price less the cost of buying it. The money you actually keep is lower: discounts, returns, packaging, delivery, payment and marketplace fees all come out of it. For online retailers, returns alone can turn a best seller into a loss maker.
A 55% gross margin on the product page becomes 19% once the costs of selling are counted.
Show the data
| Cost of goods | £45 |
|---|---|
| Fees, delivery and packaging | £22 |
| Returns and discounts | £14 |
| Left as contribution | £19 |
Stock is cash on a shelf
Stock turn, the number of times a year stock is sold and replaced, shows how hard your money is working. Slow lines cost storage, insurance and, eventually, markdowns. A regular review of what is not selling frees cash for what is.
- Track contribution by product and by channel each month.
- Investigate any line with a return rate well above average.
- Set a markdown rule for stock older than a set number of weeks.
- Count stock properly at the year end: it changes your profit and your tax.
This insight is general information, not advice for your circumstances. Talk to us before acting on it.