Understand the economics of each product first.
To avoid generating sales without retaining money, start with what remains from one order. Use consistent definitions for costs, fees, shipping, advertising and returns, and distinguish contribution from accounting gross profit.
- Subtract costs that arise with an order from a consistently defined sales amount
- Separate pre-ad, post-ad and fixed-cost results
- All starting numbers below are illustrative and should be replaced with your own assumptions
1 | Define the revenue and cost boundaries
Use sales after discounts, including customer-paid shipping but excluding tax collected on behalf of authorities. This example deducts expected return losses separately. If the revenue figure already excludes refunds, do not deduct the same refund again.
Landed cost combines purchasing and applicable inbound freight, insurance, duties and other arrival costs at a consistent unit level. Align recoverable taxes and accounting classifications with your finance or tax adviser.
[1]2 | Use a two-stage contribution calculation
Sales − landed cost − fulfillment and shipping − selling and payment fees − return losses − other variable costs
Post-ad contribution
Pre-ad contribution − advertising allocated to the order
This contribution is available to cover fixed costs. It is not the same as accounting gross profit, operating profit or cash collected. Do not decide on scaling from the pre-ad figure alone.
3 | Work through an illustrative order
| Item | Illustrative USD |
|---|---|
| Sales, excluding tax collected | $150 |
| Landed cost | − $82 |
| Fulfillment and shipping | − $14 |
| Selling and payment fees | − $18 |
| Average returns / damage loss | − $5 |
| Pre-ad contribution | $31 |
| Advertising | − $12 |
| Post-ad contribution | $19 (about 12.7%) |
With $1,000 monthly fixed costs and only orders with these economics, the model requires 53 orders to cover those costs. If combined variable costs increase by $16 per order, contribution becomes $3 and the modeled count becomes 334. These are sensitivity calculations, not sales forecasts.
4 | Try your own assumptions
The starting values reproduce the example. Calculations remain in this browser; inputs are not sent or saved. For simplicity the percentage fee applies to the entire sales amount. Check each channel’s actual charge base, fixed fees and taxes, and add relevant amounts to other variable costs.
Assumes each order has the same economics. Pre-ad contribution is the acquisition-spend ceiling before fixed costs and retained profit. This does not predict actual profit, cash or achievable volume.
5 | Avoid optimistic treatment of returns, ads and inventory
Expected returns loss should consider refunds, return freight, replacements, recoverable inventory value and nonrefundable fees. Early low volumes do not establish a zero return rate; examine multiple assumptions.
Spending all $31 of pre-ad contribution on acquisition leaves nothing for fixed costs or profit. Ad-attributed sales are not necessarily incremental sales, so reconcile advertising reports with orders, refunds and settlement records.
Before larger purchases, examine unsold stock, storage, markdowns and collection timing. Manage cash requirements separately from contribution.
6 | Review comparable weekly records
Compare orders, sales, post-ad contribution, return reasons, stockout cancellations and shipping delays using the same period, product and channel definitions. Separate estimated return losses from settled results when outcomes lag sales.
Sozu’s e-commerce support connects this product-level model with daily operations. Fees, tax treatment and rules must reflect current conditions and verified records rather than universal assumptions.
Sources and review date
Reviewed October 26, 2026. Public resources inform general considerations; workflows, worksheets and calculations are prepared for this site. References do not indicate official endorsement, certification or engagement outcomes.
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