SKU margin

SKU margin is the contribution margin of one product variant. It shows which items the ads can afford to push and which they cannot.

Stock photos and example labels, not customers.

Definition

SKU margin is the contribution margin of one product variant. It shows which items the ads can afford to push and which they cannot.

FormulaSKU margin = (price - product cost - shipping - fees - expected returns) / price

Example with made-up numbers: A product sells for 40 and costs 12 to make, 5 to ship, 2 in fees and 3 in expected returns. SKU margin = (40 - 22) / 40 = 45 percent.

How to use it

Margins differ widely between products in the same store. A blended margin hides that, and the break-even line for the whole store is only an average.

Where the catalogue is large, group SKUs by margin band and set a break-even line per band.