Unit Economics

Unit economics is the per-unit profit-and-loss view of one SKU. It answers the only question that matters at the SKU level: does one more sale, fully loaded with every variable cost, make money or lose money?

Account-level P&L hides this. A brand can report 18% net margin in aggregate while half its SKUs lose money — masked by the other half subsidising them. Unit economics is the SKU-level cut that surfaces this and drives kill/scale/reprice decisions.

The canonical per-unit P&L

For a private-label FBA SKU in the DACH market, €25 ASP:

Average Selling Price (ASP)       €25.00      100.0%
- Referral fee (15%)              -€3.75      -15.0%
- FBA fee                         -€3.40      -13.6%
- Landed COGS                     -€5.50      -22.0%
- Returns reserve (8% × cost)     -€0.70       -2.8%
= Gross contribution               €11.65      46.6%
- Variable PPC (TACOS 12% of ASP) -€3.00      -12.0%
- Storage + misc                  -€0.50       -2.0%
= Contribution margin              €8.15       32.6%
- Fixed-cost allocation*          -€2.50      -10.0%
= Net contribution                 €5.65       22.6%

* Fixed-cost allocation = brand overhead, headcount, software, divided by forecast units.

The three margin lines that matter

A SKU with negative gross contribution should be killed immediately. Negative contribution margin but positive gross = a PPC efficiency problem, not a product problem. Negative net but positive contribution = the SKU pays for itself but doesn't contribute to overhead; tolerable only if the catalogue can't survive without it.

The hidden line items most P&Ls miss

• Returns processed as full cost. A return costs the referral fee (refunded), the outbound FBA fee (kept), the return inbound fee, and often the unit itself if unsellable. Budget 8–15% of cost for return reserve in DACH categories with high return rates (apparel, electronics).
• Long-term storage fees. Annual hits if inventory ages out.
• Inbound placement service fee. IPSF is a per-unit inbound cost most spreadsheets still ignore.
• Coupon/deal discount. A 10% coupon is 10% off ASP, not 10% off margin.
• FX swing on imported COGS. If COGS is in USD and ASP in EUR, FX is a margin line.

Unit economics vs aggregate margin

Aggregate net margin can lie. Three SKUs reporting blended 18% net margin:

The aggregate looks fine. SKU C is destroying value and should be killed or repriced. Without per-SKU unit economics, this invisible.

Common mistakes

• Building unit economics on gross ASP, not net of returns. Returns turn a "20% margin" SKU into a 12% one.
• Excluding PPC from the per-unit view. PPC is a variable per-unit cost; it belongs in the calc, not in a separate "marketing" bucket.
• Forgetting fixed-cost allocation. Contribution margin looks great; the business still loses money because no SKU covers overhead.
• Updating unit economics once a year. Fees, COGS, FX, return rate, TACOS all drift quarterly — re-run the model every quarter at minimum.