Step-by-Step Learning
Guides with Screenshots
Each guide walks through one concept with real spreadsheet examples and downloadable templates.
Each guide walks through one concept with real spreadsheet examples and downloadable templates.
You can read these guides in order for a complete picture of e-commerce unit economics, or jump directly to the concept that is most relevant to your current question. Each guide stands on its own.
Most sellers start their cost calculation with the product itself, which is correct. The product cost, or cost of goods sold, is the most visible expense. But it is rarely the largest cost category when you add everything up.
This guide works through every cost category that belongs in a true cost-per-order calculation:
The screenshot below shows how the spreadsheet template structures these inputs. Each category is its own row. The formulas calculate both the absolute cost and the percentage of the selling price that each category represents.
One finding that surprises many sellers: packaging materials often represent a larger share of costs than payment processing fees, especially for lower-priced products. A $4 box on a $15 product is a meaningful cost. A $4 box on a $75 product is less significant. The spreadsheet makes this visible across your entire catalog.
Contribution margin is the amount each unit of sale contributes toward covering your fixed costs, after subtracting the variable costs directly associated with that sale. It is a more useful number than gross margin for day-to-day operational decisions.
The lemonade stand makes this concrete. Each cup sells for $2. Variable costs per cup are $0.80 for ingredients and the cup itself. Contribution margin per cup is $1.20. Fixed costs for the day, including the table rental, the sign, and the pitcher, total $24. To break even, you need to sell 20 cups. Cup 21 is the first cup that generates actual profit for the day.
For e-commerce, the translation looks like this:
A negative contribution margin is a serious signal. It means each additional order makes the situation worse, not better. Volume cannot solve a negative contribution margin problem. The spreadsheet for this guide includes a break-even calculator that shows how many orders at a given contribution margin are needed to cover a set of monthly fixed costs.
Not all money-losing products are obvious. Some are easy to spot: a heavy item with a low price point that requires expensive shipping. Others are subtle: a product with a moderate return rate that pushes the effective cost above the selling price when returns are properly allocated.
This guide covers the four most common patterns that create money-losing products:
The spreadsheet for this guide includes a SKU-by-SKU analysis template. You input the relevant data for each product and the template calculates contribution margin per unit. Products with negative or very low contribution margin are highlighted automatically using conditional formatting.
Free shipping is a marketing feature that carries a real cost. When a customer pays for shipping, the shipping cost is a line item in their payment. When shipping is free, that cost moves to you. Whether your margins can absorb it depends on numbers that are specific to your catalog.
This guide works through the free shipping math in four scenarios:
For each scenario, the guide shows how to calculate the break-even point: the minimum contribution margin per order that makes free shipping sustainable, given your average shipping cost and your mix of products. The spreadsheet template includes a scenario comparison tool that lets you model different thresholds and see the projected impact on contribution margin.
One pattern worth understanding: free shipping thresholds can increase average order value, which can change the math significantly. The guide covers how to factor this in without overstating the benefit.
If there is a specific aspect of e-commerce unit economics that these guides do not address, the contact page is the right place to share that. New guides are shaped by the questions that come in.
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