A product that sells well but earns little profit
Photo: Avila Ops Tecnologia
A product that sells well but earns little profit is only a problem if it does not lead to anything else. If it brings in customers who then buy a high-margin item, it is a draw and is doing its job. If it ties up cash, inventory, and service time, and customers leave with that item alone, you are selling it for your supplier’s benefit, not yours. The decision comes from two numbers: margin per unit and what customers buy with it.
The Christmas best seller is often precisely the entry-level product, with a price customers compare and a margin you squeeze to win that comparison. In January, when sales are slow, its leftover inventory remains.
How do you calculate product margins without a costing system?
Margin per unit is the selling price minus everything it costs to get that item into the customer’s hands. For most small-store products, the calculation fits on one line:
Selling price minus: purchase cost, allocated inbound shipping, sales tax (the rate under your tax regime), card or Pix fee, packaging, outbound shipping when you cover it, and any commission. What remains is the unit contribution margin. Divide it by the selling price to get the percentage margin.
A personalized mug sells for R$ 45. Cost: R$ 18, tax and card fees: R$ 5, packaging and label: R$ 3, allocated free shipping: R$ 8. Margin: R$ 11, or 24%. It seems reasonable. But personalization takes 15 minutes. If the same time produces a R$ 160 kit with a R$ 60 margin, the mug costs R$ 49 in opportunity every time it sells alone.
Run the calculation for your 20 best-selling products. You do not need all 300. The guide What is an inventory count, and why count stock? explains where the unit count comes from; here, what matters is the value per unit.
Is it a draw or a burden?
After margin, the second question is: what do customers buy with it? Take the last three months’ orders containing the best seller and count how many contained that item alone.
| Situation | What it means | What to do |
|---|---|---|
| Low margin, customers buy other items | The draw is working | Keep it and place the high-margin item beside it |
| Low margin, customers buy only it | A burden | Raise the price, sell it only in a bundle, or remove it |
| Low margin, customers return to buy again | A gateway | Keep it and work on the second purchase |
| Low margin, takes up lots of inventory | Tied-up cash | Reduce inventory before deciding anything else |
The common mistake is looking only at the product’s revenue line and concluding that it “supports the store.” It supports revenue. Margin supports the store, and the five numbers in Closing out the year show the difference.
What should you do with it in January?
From easiest to hardest:
- Raise the price 5% to 10% and measure. A high-demand entry-level product can usually bear more than the owner imagines. If the product’s total contribution (margin per unit times units sold) rises, the change helped.
- Sell it in a bundle. The standalone mug disappears from the website; “mug + kit” at R$ 79 replaces it. People who only want the mug can still buy it in the physical store at full price.
- Change suppliers or negotiate a bulk purchase. If the product sells well, you have the volume to ask for a better price. Bring that into the contract renewal conversation.
- Discontinue it. Only if it is purely a burden: low margin, customers buy nothing else, do not return, and it ties up inventory. In that case, a January clearance is a gain, even if it looks like a loss.
None of these are December decisions. They are January decisions, with numbers in hand. December is the month to calculate.
What to do now
List the year’s 20 best-selling products and calculate each one’s margin per unit with the one-line formula. Mark those below your average margin. For those, check what customers buy with them. If the data is scattered across the card terminal, store, and notebook, moving beyond spreadsheets without losing your history is what solves this for next year: avilaops.com/sistema-para-pequenas-empresas or contact us on WhatsApp: wa.me/5517997811471.
Frequently asked questions
What is considered a good product margin?
There is no single number; it varies by sector and turnover. What we can say is that each product’s margin must be compared with the store average and the time it consumes. A below-average product that consumes more time is the first to review.
Should I stop selling my best-selling product?
Almost never. The best seller is usually the gateway. Change the price, bundle, or supplier before considering removal. Removal is the last step, only for a product that is purely a burden.
How do I know what customers buy with it if I have no system?
Take the last 50 orders or invoices and count manually. It takes effort, but fits into an hour and answers the question. Note that this is one reason to keep records in one place.
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