Protect ecommerce margin from shipping and returns

Build the order-level cost stack

Start with selling price after discount. Subtract product cost, inbound allocation, pick-and-pack, packaging, outbound shipping, fixed payment fees, percentage marketplace and payment fees, and variable advertising cost. Add an expected return cost based on the return rate and loss per return.

Keep fixed business overhead separate when the question is whether one more order contributes cash. Include allocated overhead when the question is whether a product or channel is sustainable overall.

Test the promises customers see

Free shipping is a price structure, not a free cost. Compare a delivered price with a product-plus-shipping price and measure conversion, average order value, and contribution. For discounts, percentage fees fall with revenue but most fulfilment costs do not.

Run scenarios for parcel zones, dimensional weight, multi-item orders, and return rates. A single average can hide a region or SKU that loses money.

• Model the actual payment fee structure.
• Use packed parcel data by SKU or order type.
• Treat ad cost as a distribution, not a guarantee.

Set a stop rule

Define a minimum contribution per order or contribution margin before launching a promotion. Review actual cohort performance after enough orders, including refunds and shipping adjustments, then stop or reprice offers that miss the rule.