What is product margin, and why can your bestseller lose money?
Photo: Avila Ops Tecnologia
Product margin is what remains from each item sold after its cost, payment fee, packaging and store-absorbed shipping. A R$ 100 product costing R$ 55, with R$ 4 in fees and R$ 6 in packaging and shipping, leaves R$ 35, a 35% margin.
Bestsellers may lose money because they receive the largest discounts, free shipping and advertising. When margin is negative, selling more loses more.
How do you calculate each product’s margin?
Use one spreadsheet row per product and six columns: selling price, purchase cost, payment fee in reais, packaging, absorbed shipping and average discount. Add the last five and subtract from price. The remainder is margin in reais.
Do this for your ten bestsellers. In small stores, mistakes there are expensive. The average order value guide explains how product margin becomes order margin.
What can you do with an unprofitable bestseller?
Remove its free shipping and apply it to a high-margin product. Bundle it with a healthy-margin item so the order is positive. Or accept low margin as an entry point with a repeat-purchase plan covering the cost.
A household-goods store sold 300 thermoses with 40% discounts and free shipping. Each lost R$ 2: a R$ 600 loss on the campaign’s bestselling product.
What to do now
Calculate margins for the last 30 days’ ten bestsellers with campaign discounts applied. Remove negative-margin items from offers or bundle them today. Avila Ops builds store-connected dashboards updating product-level numbers automatically: avilaops.com/sistema-para-pequenas-empresas or WhatsApp wa.me/5517997811471.
Frequently asked questions
Is product margin the same as profit margin?
No. Profit margin also deducts a share of fixed costs such as rent and salaries. Product margin stops beforehand, showing what each item contributes toward fixed expenses.
What product margin is good?
It depends on fixed costs it must cover. If total monthly margins do not cover rent, taxes and salaries, they are too low.
Should taxes be included in product margin?
Yes, if calculated on sales, as with Brazil’s Simples Nacional. Add the tax rate as another column and confirm with your accountant.
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