April 28, 2022

It Has No Impact On Margin, So Now What?

Yesterday I shared this little tidbit from a company:

  • Gross Margin Percentage, 1st Order = 53.9%.
  • Gross Margin Percentage, 26th+ Order = 50.2%.
This prompts a reader to ask:
  • "Kevin, so what? Margin percentages are essentially the same. It's irrelevant."
On a $101.00 average order value, it is relevant.
  • $101.00 * 0.539 = $54.44 Gross Margin.
  • $101.00 * 0.502 = $50.70 Gross Margin.
It means that best customers are giving up $3.74 of gross margin ... per order.

When you consider that a typical e-commerce brand is producing 5% to 10% pre-tax profit on an annual basis you don't want to just give up essentially HALF of it at an order level by being careless with your gross margin dollars.

Stop being careless with gross margin dollars.

Start protecting profit, ok?

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