Every time a founder tells me „I've got 40% margin", I reach for the coffee. Because I know what's coming. We start digging. We subtract real cost of goods. Subtract courier. Subtract returns. Subtract platform commission. By the end it usually lands around 18-22%. Nobody's lying on purpose. They've just never done the math properly. That's the real problem. Scaling decisions get made on a margin that doesn't exist, and the bank account pays the bill.
The right formula
What must be included, no shortcuts
- Cost of goods. The real price you pay the supplier, plus transport to your warehouse.
- Shipping to customer. If you offer „free shipping", it still comes out of your pocket. You just bury it in margin.
- Packaging. Box, wrap, labels, protective material. Every order.
- Estimated returns. If you have a 5% return rate in that category, you add 5% to cost. Returned products either break or go into secondary stock at a discount.
- Platform commission. On eMAG you can hit 15-20%. Amazon, 12-15%. Allegro depends on category. All of it counts.
- Payment processing. Stripe, PayU, bank fees. Between 1.9% and 3% per transaction.
- Manual packing. If you employ someone to pack orders, their time counts. You split the cost across processed orders.
Concrete example, on a scooter
You sell an electric scooter at €500. The founder says his margin is 56%. Let's see what honest math looks like.
| Item | Amount |
|---|---|
| Sale price | €500 |
| Cost of goods (China + EU transport) | €220 |
| Shipping to customer | €28 |
| Packaging and labels | €7 |
| Estimated returns, 6% on category | €13 |
| Payment processing (PayU 2.2%) | €11 |
| Total variable costs | €279 |
| Gross profit per unit | €221 |
| Real net margin | 44.2% |
Real margin, 44%, not 56%. The 12-point gap is €60 per scooter. At 100 scooters a month, €6,000 the founder thinks is allocated for ads and isn't anywhere. That's why, when you scale on the wrong margin, the first two months seem to work, and the bank statement for month three hands you the reality.
Scaling thresholds
| Net margin | Verdict |
|---|---|
| Below 15% | You can't scale. Commission and media cost eat you alive. First move is restructuring the product, not buying ads. |
| 15-25% | Limited scaling. Small ad budget, heavy focus on repeat customers and LTV growth. |
| 25-40% | Healthy zone. You can scale on commission without dying, provided operations can keep up. |
| Above 40% | Room for aggressive scaling. Sustained creative testing, bigger volumes, new audience exploration. |
How to grow margin without raising price
- 1Switch supplier or negotiate volume. Going from 100 to 1,000 units a month gets you 15-25% off. Beyond that, more.
- 2Optimize packaging. Smaller box means cheaper volumetric shipping. On bulky products, the difference can be 20-30% per order.
- 3Reduce returns. Better photos, clearer specs, product video. Customers get what they expected. Return rate drops from 6-8% to 2-3%.
- 4Bundles. Sell two or three products together at a small discount. AOV rises, shipping cost splits across items, effective margin goes up.
- 5Checkout upsell. Extended warranty, accessories, setup service. Margins there are 60-80%. Adds real profit with no extra marketing budget.
The 30-minute exercise
Open Excel. Put every product on the site as a row. Seven cost columns, from the list above. Calculate real margin on each. Sort descending. Within 30 minutes you'll see something you haven't seen before.
- Two or three products with margin above 40%. That's where the money is. Scale here.
- Five to eight products at 20-35% margin. That's where you work on cost and bundle plays.
- Products below 15%. Remove from the catalog, or use them as loss-leaders for AOV, knowing you lose on them to win on the cart.