Rising costs, shrinking margins, and invisible fees are eroding ecommerce profits faster than most sellers realize. In this episode of On the Rocks | eCommerce Hour, Chris Geno and Jay Kimelman break down the hidden costs that eat away at your bottom line and share real strategies to protect your profit margins. Whether you sell on Shopify, Amazon, or across multiple marketplaces, this conversation will help you tighten up your operations, forecast smarter, and finally get a true picture of your cash flow.
In This Episode, You’ll Learn:
• Why your sales are up but profits are down—and how to fix it
• The impact of rising shipping costs, FBA fees, and ad spend inflation
• How to track your true landed costs (freight, tariffs, duties, packaging)
• Why Shopify dashboards lie about your actual margins
• How to calculate break-even ROAS and contribution margin
• The danger of discount culture and how it kills long-term profit
• How to use tools like Cin7 Core, Xero, and A2X Accounting for visibility
• When to negotiate supplier terms to protect your cash flow
• What metrics your CFO should monitor monthly to prevent profit leaks
• The one formula every ecommerce founder must know to stay solvent
Related Tools & Resources:
👉 Landed Cost Calculator – Free Tool
👉 Cin7 Core Inventory Management
👉 A2X Accounting for Shopify & Amazon
👉 Xero Accounting Software
👉 Book a Profitability Review with High Rock Accounting
What’s up Chris? What’s going on Jay? Happy Halloween I’m wearing the wrong clothes. I think that all the way through should have put the orange shirt on instead of red. Should have. Yes. Welcome welcome everyone to on the rocks the e-commerce hour. Today we’re banging through or not really we’re going to talk deeply about episode two of our cash flow arc or the title of this particular episode or the thing that we’re going to talk about most is rising costs and shrinking margins. And so as any e-commerce operator knows like those both those two things that I just mentioned rising costs shrinking margins are both very real and very problematic. And in a third thing they’re very much happening right now. So your sales are up but your profits down you’re shipping your ads your supplier costs everything every single thing that you are your your outlying is eating your margins alive. If your profit feels smaller than it used to that’s not your imagination it is very real. And that’s what we’re going to talk about today. And so one of the things that I want to ask right is when was the last time you checked your actual margin per order after fees as a fulfillment because if you haven’t today is the time to do it and today is where we’re going to talk about those types of things today. Specifically we’re driving into why e-commerce margins are getting crushed and what you can actually do to protect them because that’s our favorite thing to do here on the show is give you actionable advice that you can take home and put into practice. So so before we get into actionable advice let’s talk about this problem. So Jay I think the thing that we’ll talk about first today is the profit squeeze for sure. Which which I wish now we’ve had some ghostly paper something like the profit poltergeist. So so when we talk about the profit squeeze right we talk about we’ve talked about the hey maybe your volume is going up maybe you’ve even raised your prices. But you’re you’re getting hit by these additional costs that are what’s squeezing that problem that can come in lots of different ways. The first one the one that you see the most frequently the one that you see the most often is on the shipping and fulfillment side so cost of gas is going up so full fuel surcharges are going up. You’ve got some maybe dimensional weight pricing so that your your your products are costing a little bit more to ship and then of course our folks at Amazon they they know that they want to make some money in there. They’ve started to increase the cost of FBA and so you’re seeing the impacts of FBA FEE HIGHTS like these are very real real things that happen they happen all the time and they definitely can increase your cost situation. The second thing that we talked a little bit about on the last episode actually and it’s still relevant here is that you’re that your cost per mill like they’re they’re going up across all of your different platforms right your ad spend is getting more expensive. In fact in fact J up to 30 to 60% year over your increases from this year from last year to this year and that’s across meta Google tick tock all those guys everything is costing more to get views on your product. And so when you’re selling direct to direct consumers that is really difficult that’s really challenging one other one other thing is like you’re not the only person who’s seeing these fuel surcharges you’re not the only person who’s seeing these ads been related issues. You’re suppliers are seeing those two so the cost of maybe your raw materials or your or the good that you’re buying those are starting to increase the packaging that you’re putting it in that starting to increase. And the labor force around the world is getting a little bit more expensive and Jay that’s before we even talk about the thing that we’ve talked about on this show probably like a hundred times and that’s the terrorists that are impacting all of these things as well. Yeah the biggest factor that’s hitting these items right now because we don’t know what they are we can’t predict them because of the changing environments. Yeah right exactly and so you see you’ve got your your outbound prices with your shipping are going up your customer acquisition costs with your ad spend are going up and you’re inbound pricing from your suppliers that’s all going up you just got going up everywhere. And so that type of thing is is causing this shrinking profit despite potentially growing your own product right despite selling more as there are some external data points that can that support this to Shopify merchants average profit dropped from from 20% in 2022. So like 10 to 12% now like that’s a pretty big and drastic drop that’s a 10% drop which is substantial. Yeah and then like I mentioned of course as as ad spend’s going up 30 to 60% the your cost per acquisition that CPA that’s 60% ups and in for those direct consumer customers since 2021. So again you’re just seeing the outputs of all of that just be harder and harder and more difficult so everyone’s chasing sales volume but doing that maybe like running on a running faster on a treadmill it’s actually going faster still right so even though you’re you’re selling more volume you’re just giving back more and more of it because your your costs are increasing just is just as quickly. Now Jay that’s a that’s a cost side are there’s some other cost side implications that that you think are worth talking about today well I think that’s where we actually want to keep it right there and that space you know because you look at meda ads they are up 30 to 40% year over year and tick talk is still lower but they’re climbing right sellers are chasing performance but sales performance doesn’t exist anymore. It’s just not there so you know they need something to work towards and you know you mentioned fulfillment fees you know between UPS and FedEx Amazon shipping those costs are hitting the Amazon fulfillment fees are hitting so you’re looking at anywhere from 20 to 30% before you even look at product cost so your margins are going to eat in a way I crazy and you have to do it. And you have to you know chase those any bits the 5% shaving off the price from your manufacturer whatever you can get to help you maintain that margin and you know people think that you know chasing after the sales and building it on volume is going to help but when with every sale you have shrinking margins you’re just making your you’re getting lower profits overall so you know don’t don’t be doing that and you know no like you said do you know what your product cost is after cost and after freight and and add cost and if you don’t you’re just playing a guessing game is no idea so you know getting the game know what those costs are and predict what your average order is what your profit is after every order and that way you have your finger on the pulse of that. That’s right and there’s some other in the reason that I was asking about costs is that there’s some others I mean you’re not you’re not getting pressured just on the cost side because you may have some profit leaks on on the sales side too there are some other hidden killers of margin as well one of those is a discounting culture right we talked about that on the show right it was prime days a couple months ago it was prime days again last month earlier this month we had a black Friday Cyber Monday coming up next month. We’re just discounting all the time and so sometimes it is very it is very easy to overuse sales and promos to move your product right so you may you may be getting captured up in all of the in all the Amazon’s FBA generation here through their prime prime every week or whatever that whatever it’s going to be in prime day every day yeah in a few years but but that this that it is very when you start to see sales volume decrease your you start to you start to get concerned right like that’s that’s a very understandable thing especially when you’re sitting on a bunch of inventory but but overusing sales and promos to move your product is probably not the answer. Yes so you have to be aware of that yeah go ahead. Discounts are like caffeine you know they feel really good at the moment but after a little while you’re going to feel that crash and it’s going to catch up to you. So it’s a stick is part man that was a good snickered hard joke it’s like that Halloween tomorrow afternoon it’s going to be really nice in the morning but what the thing is you said it there you’re training your customers to wait for a sale right and all they’re doing is waiting for you to drop your price for those sales periods now if you put that money into ads instead then you can keep them from waiting for that sale. And try to keep those sales moving throughout the year right or instead acquire new customers to right right exactly but you just remind it so quick quick aside here I have not had any candy we we’ve had candy in this house for like two months yeah I have not had any in over two weeks and I don’t plan on having any tonight but that’s Nickers bar sounds so damn good right now I know I am. I know I have. I haven’t had any candy in over two hours. We’ll do a great. I have managed to keep my hands out of the candy so far today but I can’t speak for yesterday though so the Mars or whoever it is whoever owns that group now they’re there I’m sure they’re pretty excited about this week we’ll see how it goes. For sure. One particular problem that Mars doesn’t really have to deal with that much but that that that e-commerce providers definitely do and that can definitely kill your margin if you’re not keeping track of this or being aware of it as returns right the reverse logistic cost so to get that money to get that return I did return to back the restocking fees like all of these types of costs they each are margin really quietly you don’t notice it happen you just see that sales dollar go back that really good. So I’m going to go back that refund go back but you don’t really think about the additional costs that go along with this and especially if it’s something that you then need to repackage like there’s just so many different costs that you can incur for returns it’s really important to be aware of those and to understand how that impacts your overall margin. Depending on what that product is you have to repack it inspect it see if it’s in sellable condition if you have to donate it or expose it or sell it at a deep discount so anyway you look at it a parallel manufacturers are looking at a 25 to 30% additional cost on every return and you’re eating directly into your margins once you’re doing it. Nothing you can do about it so that’s a that actually is one of the things that speaks to some of the things that we’ve talked about on other shows of how how valuable the try on AI might be if it’s something like that or or getting those reviews that really tailor in responses to how it fits and all of those kinds of things so being aware and trying to steer your customers to the right purchase the first time can be really really powerful. So important. The title of the series is all associated with cash flow and everything that we really talked about so far is this margin and how it’s eating into cash flow that way. The next one actually is more of a true like cash flow consideration and that’s that’s over stocking. And there are lots of reasons that that can happen and especially right now it’s very possible that if you were doing some some tariff related trickery like maybe maybe you bought a little extra stock to try to miss the tariffs later. But that cash that gets tied up in in that inventory and especially if you’re having some minimum order quantities or something like that where you get tied up with a lot of slow moving inventory that can create a huge financing drag because that you’ve outlaid that cash already but you’re not turning that cash into new cash. And you’re not you’re not earning those margins that are decreasing anyway because you’re just sitting on this inventory and so over stocking especially of these slow moving products can be a really really really problematic problem. That’s really that’s pretty obvious but that can be that can be very very problematic. And so being aware of your stock levels and understanding when when like Jay talked about maybe it’s time to do a point at discount on a specific product so that you can move these slow movers rather than just sit on them for a while. Jay any thoughts on over stocking? Yeah a couple of them there actually. So you know we deal with sellers with you know six figures of inventory and that’s a lot of moving category and all that is is cash sitting in the warehouse and you can’t love that to happen you gotta stay on top of that. And you know a lot of people are taking out Shopify loans to cover the expenses because that inventory is sitting there so it’s super important that before you go and make these larger purchases. That you do an analysis look at how many days on hand you have of your overall stock and you could do that on an individual basis for every item and identify those items that are sitting there that are over stocked and make sure that you are not adding to that problem. And right now there’s so many AI tools like we use in seven and they have four site AI that’s actually looking at that and they’re telling you which are your cash cow products and what are your loser products and you know what you need to do in it. You have 600 days of this product on your stock and it’s just eating away your cash flow and it’s horrible. You gotta work that and maintain that stock and like Chris said it might be worth it to convert it. And even if you get a lower margin you convert it turn it into cash and use that cash and you pay down those capital loans you’re gonna save on that interest cost. And so you win win because now you’ve cleared out that warehouse space you brought in cash and now you’ve reduced your expenses so it’s win win win in that situation. Yeah and that’s a thing that we’ve talked about on the show a lot too is that one of the keys to being successful especially right now is being adaptable. So you may have brought that inventory with the expectation that you were gonna sell it quickly right that it was gonna be a good product you you created something maybe it’s a tailored version of the thing that you had and you thought this is gonna be a big winner. We love where this is gonna be you got it in and it just didn’t catch being adaptable and being willing to say up you know what we we blew it on that one let’s let’s move on to the next one can be really important right for all of those exact reasons right. And so that oversocking can be a huge huge place that that erodes your profits through that inventory that inventory caught both the like holding costs so your warehousing costs and then also on top of that the financing like J was talking about shop of filoes or even banknotes if you’ve got them right there could be anything like that can if you’re financing stuff is just sitting there that’s not that’s not great. Yeah I don’t even think about the warehousing costs I mean if that product is sitting at Amazon you’re paying a 30% surge charge for it during the holiday season you don’t need to be sitting there and if you’re on a 3.pl you’re paying for that space as well. So you know beware of where your your product is and what you’re paying so it’s really really important to keep that head down. That’s right one other one other area to keep your head in the game J is is with your subscriptions. If you’ve got poorly managed bundles and again that discount fatigue of like oh yeah okay people are just tired or bored of the discounts those subscriptions can can do the same thing that we’ve talked about with some of those other areas. Yeah and then Jay the marketplace fees so we talked a little bit about FBA but there are also fees associated with just being on the marketplace so Amazon Walmart Etsy they’re all taking bigger cuts now right and that’s not a not a profit side thing but that is a being able or that’s not a revenue side thing but it is being able to to sell your product and it’s just costing more those those I think Walmart most of these folks call this commissions right. Yeah and you know when you look at your Amazon statement you have fulfillment costs you have ship you’re warehousing and shipping which are your fulfillment costs you have your seller fees and then you have the adjustments in there so you know by the time you’re done I mean it’s thousands of dollars on there so yeah I mean you are right and you know you say it’s not tied to revenue but it is because it’s all based off either the goods moving out that you’ve sold and you have the revenue that you’ve earned so as your sales go up both of those costs are going to go up regardless. Yeah and that’s more meaning that your cost side stuff. Yeah I’m not using these others we’re revenue side well I guess not really the overstocking stuff that’s the cost side stuff. Yeah. All good. One other thing that can definitely be a place where you lose some profits without really thinking about it is in your merchant process includes. Yeah you really want to be thoughtful about that I mean I think the standard across the board these days is 2.93ish plus 30 cents per transaction I mean that’s I think that Shopify is basic at this point in time and that’s kind of what you’d expect most of the time but that is something that you have to consider. You can’t just ignore that cost because it is very real and you’re not ever going to see that cash so it isn’t as though that’s coming in the door and then you’re paying it back out doesn’t work that way. Yeah. You’re taking that right off the top. So go ahead. So if you’re running a real high volume and high sales dollar store you reach out the Shopify and say block. I am pushing $3 million $5 million $10 million I want a lower rate and they will do it you just gotta stand top of them and do it. So if you don’t ask you don’t get so make sure you ask. Put the squeeze on that. Yeah or they’re going to put the squeeze on you. Most definitely. And there are very real world examples everywhere I think as we were putting together the commentary of this show we found a direct consumer skincare brand that had J $3 million and annual revenue but they were only netting 4% profit after that. That’s just given it all away. And it’s a lot of sellers may not even know like almost half I think Jay don’t even know what their real gross margin is until they until it’s tax time. They’re just out there flying blind. This is a thing that you definitely want to be on top of and you want to make sure that you’re being really well aware of. When we think about those hidden hidden killers of margin are there are there others or additional comments that you want to add today. No because I’m not going to cut into what you got for next one but I do want to say that you know everybody thinks it’s sexy you know I got a seven bill I mean I got a seven figure store I hit a million dollars in sales. People are constantly talking about it but you don’t hear anybody say you know might he come or spits us hit 200 came profit because it’s just that damn hard. When you certainly not hear people brag about how they spent $80 to acquire a customer the bought a $60 product. Exactly. My marketing is so good I spent 80 bucks to sell a $60 product. It’s like the Costco method you know we’re selling chickens for five bucks and we want you to come in and buy that but you’re going to walk out with $500 worth of other stuff. So you know that that $80 discount or cack to buy to sell $60 hopefully it’s got long term value in there and that’s the play but up front it doesn’t look pretty. No it doesn’t. For sure again it’s not a thing you’re going to hear people brag about and sadly it’s probably not a thing that a lot of people even know about. So it’s one of the hardest things to really put a put your finger on and get a pulse of and so it’s really important that you’re doing the evaluations of that right because if you’re spending $80 to sell a $60 product that you give 50% of the cost spec somebody else you really spent $80 to get $30 of $30. Yeah. That’s really that’s that that feels even yuckier. Yeah for sure. And so then Jay of course as we do on this show all the time this is my favorite part of the show it’s the what do you do now your margin rescue playbook. So what we’re going to talk about now are a few actionable things again the reason that you come to the ecommerce hours to get actionable things. These are actionable ways to stabilize or grow your margin and so we’ve got seven of them today. So let’s get to it number one redefine those profit targets you need to understand and fully be aware of your break even row as and the margin floor associated with that right you need to understand it at X dollars of spend that I have to generate X dollars revenue. To be able to just even just get back to where I want to be right this is that that’s a critical thing because it helps you to understand both where you should target from an ad spin perspective. But also like what what what to be looking out for because the that type of information is available basically daily you know how much you spent on on Facebook on Google on tick tock every day. And you can see how much you sold there so you can use this information is pretty pretty available so make sure that you have a really good understanding of that. Jamie thoughts about the profit targets. Yeah I think it’s super important you know and we were talking about tariffs and landed costs you know it’s like what is your effective profit margin after the tariffs got calculated in there and you can immediately see that. And what are the calculations is what is the impact of that tariff on on your profit on that product and you know when we put in an actual customers detail was $175,000 so that is not anything is needed I mean it’s a lot of money that’s almost that 200K that we were talking about. Yeah yeah absolutely it’s huge. Jay alluded to the second point earlier and that’s that’s to negotiate supplier terms so consider consider what whether you can get volume discounts if you buy a certain amount of inventory especially your fast moving stuff. Consider and have conversations around whether you can enjoy shared freight or or just allow your you allow your suppliers to give you a little bit more time so that slow moving inventory you have an opportunity to turn before you have to cash out later cash outlay that inventory cost. Obviously that’s a thing that we’ve talked about on the show several times right there are lots of advantages to being able to say hello can you make my products cost a little bit less and especially right now as we’ve talked about on the show before as well. Suppliers understand that those tariffs are making their products slightly less appealing and may be more interested in keeping your business than then losing it all together so they may have a little bit more flexibility with some of these things right now. And so it’s a great time especially if you’re feeling the squeeze here it’s a great time to go back to your suppliers and make sure that that that you’ve asked for as much as you can. Janie extra thoughts on talking to your suppliers. Yeah it’s a lot easier to get a 5% discount on your products from your suppliers than it is chasing after the next ad hack to get your cost on your ads so do that because it’s going to have a bigger impact because odds are you are placing a larger order you know you’re getting a stock for you know black Friday you got a large order there. So you can do that and do that and the other thing I want to say when you’re negotiating with your suppliers you know and you’re you hit you hit on something earlier and it’s like okay let’s order larger quantities but I don’t want to shift right away. So if you can commit to a larger quantity you might have to pay for half of it up front but they will sit on it and ship it in intervals to you and then bill you the remainder of it over time but it won’t be taken up all of that warehouse space either. So that will save you in the long run if you calculate that out you’re probably breaking even on that but by increasing your order you’re getting that bigger discount on the price. So that’s where you’re going to win there so definitely look at that from supplier standpoint. Yeah right and they’re not the only suppliers that you should negotiate with and be cognizant of our third option here is to optimize your fulfillment and that means to like to have those conversations with your 3PLs. Use those 3PL rate comparisons make sure you’re getting the right shipping costs if it means that you need to do a deal with a specific shipper you know you can maybe get some good some better pricing in that kind of situation right there are lots of opportunities for those rates to be to be looked at and reviewed. That also means that you can like we don’t really talk about it as a thing you should compare to but that also means like being thoughtful and comparative to Amazon they are there just a 3PL with a really popular name and they just drop in their product instead of being a 3PL their FBA right like it’s got its own special name but they are just a 3PL that you’re using and typically for a full volume. And so be cognizant of the cost that you’re giving to Amazon as well so that you can compare like how comparable it is and and how much you’re giving up versus having that marketplace that you’re disposal. One other thing and we talked about this a little bit right is the idea of consolidating skews right make sure that those product products that are slow movers or that you thought we’re going to be great but really ended up just not just taking up inventory space maybe it’s time to get rid of them. And it is J mentioned last year I think this is the right time to do it right everyone’s buying stuff like Friday Cyber Monday anyway might as well get rid of those things that you’re not wanting to carry 2026 it’s time to do it. It’s a mid-fluence or marketing going on that get that stuff moving up the door. That’s right yeah exactly. But I want to hit up on the 3PL thing you were just talking about there. So you know a lot of firms will get a 3PL and ship from one location whether that’s East Coast West Coast you know whatever that may be but it might be more efficient to be stocked in multiple warehouses strategically positioned because shipping will be lower. You still have to get the product there so I’d say truckload versus all of the independent boxes going out the door so you have to weigh that out and see what that cost is but shipping times you know are much quicker and the quicker packages get to customers more side of the hour because it’s a right now we’ve talked about that you know forever with you know buying online pick up and store by piss. Yeah sure and you know things like that so take advantage of all of that. Yeah absolutely super important things right. One other thing to do with your with your skews we talked about consolidating right and getting rid of those bad ones but one other thing that you that you may want to do is just audit them more broadly like do take your bundles and maybe maybe you want to maybe you want to throw those slow movers in a bundle. Just to get rid of them maybe you just want to just drop those products all together so you do want to make sure that you’re being really thoughtful of your overall your overall product portfolio so that you can ensure that the ones that you’ve got the ones that you that you’re using are are really really useful for you that’s that’s point number four point number five is to just really really really thoughtful around your at spend right. We’ve talked about the way that costs are increasing on meta on Google on all these folks the customer acquisition costs are so high. So it may be time to reevaluate or to to reallocate at spend maybe more more valuable to you to shift from acquisition into retention so maybe email and SMS is a little bit more powerful for you it’s certainly cheaper. Using user generated content like like Jay talked about getting an influencer to help support you to get rid of this slow moving product to get it out the door that that may be more powerful than using paid reach right like there that is it is certainly a thing that you should be evaluating. And so being real again being really thoughtful about how you’re using your money and what it’s generating is really critical to your longer terms success. So you’ve got to get ready thoughts about at spend reallocation. Yeah I mean even if you can just move 10% true customer retention you’re ahead of the game at that point you know in shift it there and it keeps clients your customers coming back and that’s what you ultimately want. Yeah the sixth thing right is to review your pricing we don’t talk about that a whole lot here but it is very true that a lot of folks end up setting a price and forgetting a price right if you’re not spending the time to understand what you want to where you want your target margins to be and how your pricing is impacting both purchases as well as your over as your performance. It is worth doing that so you can implement dynamic pricing and then definitely we want to review at least annual increases I would probably do that a little bit more frequently if you have the capacity if you think your customers do. And then of course it’s like really important to also be aware of what your competitors are doing because if they’re ticking up their prices a little bit that’s a pretty good and clear indicator that it’s time for you to do the same. You just don’t want to get stuck in the same pricing for forever. Jayny you thought it’s about pricing. Raising prices is scary. You know if did you raise it too much did you leave too much on the table so you have to do it it’s a gut and you know when we do it as a count we know it pretty much immediately you don’t know it immediately when it’s retail you find out it’s a lagging indicator at that point. But you know most customers aren’t going to notice a 3 to 5% increase but they will notice when your products are not the shelves anymore so it’s worth raising your prices even 3 to 5% and get that done. Yeah and you do have the opportunity to if you’re doing that dynamic pricing to move it around a little bit to move it up a little bit down move it around to what to understand what those impacts really are right if you’re evaluating it maybe in a slower week maybe a week here after Halloween three weeks before black Friday maybe it’s a good time to do a dynamic increase just to see what the impact is. So definitely review your pricing review it frequently make sure you understand what those impacts are. And then our final final step couldn’t be more like this show Jay you need to calculate your landed costs accurately. Same for years. Jay even built a tool to help you do it the land of cost calculator is one that’s that’s out there to help you do that you want to make sure that you include freight you want to make sure that you include duties you want to don’t forget about your packaging your platform fees there’s lots of costs that go into being able to evaluate the profitability of your products. And that’s before we even talk about the big monkey in the room here right the tariffs that that just keep coming and going and coming and going and and I think they’re coming again I’m not really good who knows what’s going on over there but before we even talk about that there are lots of things that you need to evaluate as you in order to calculate your landed costs accurately. And Jay I know this is a thing that you’re passionate about so tell me more. Yeah you don’t fix shrinking margins with more sales you do it with smarter ones and you have to pay attention so that’s it I mean jump in there and you know when it comes to to tariffs and landing cost you have to know what it is because you know and we’ve given this example before you’re selling a product you have a small margin on it because you just try to cover your cost. And you forgot that you you got shipping costs on that and that’s 15 cents on a 25 cent per item it’s 15 cents a pound on a 25 cent per pound item that is a lot of money so pay attention and know what your costs are and if you don’t and you can’t get systems in place that can do it for you you know reach out to us we can help you with that for sure. So yeah absolutely and the biggest thing to remember right and and Jay you kind of alluded to this as well right it’s not about selling more like that is it’s always the thing right you know seven figure your seller that’s a big deal right but it’s not really about selling more it’s about keeping more and the way that you keep more is exactly what we talked about you make sure that you’re aware of those profit targets you understand the cost of your products and you negotiate them where you can optimize that fulfillment you auto and make sure you’re not selling crap products you make sure you’re spending your money up for ads in the right way you make sure your prices are accurate and then of course it is also important to make sure that you understand fully your costs and that might be the most important of them all which brings us to our final segment here which is our which is a segment we actually introduced last time but I didn’t really talk about we’re going to call it the CFO lens and so this is to give you a framework for monitoring the things that we’ve just talked about. Here right those KPIs that you need to be really thinking about some of these are going to be pretty basic and some of those are going to be things that you really need to keep an eye on and so Jay I’m going to run them off quickly here right it’s important to understand your gross margin who would have ever imagined but how can you understand your gross margin if you don’t understand your landed costs so it is important to understand all of the components of what your margin are and understand that they’re accurate. It’s also important to understand your contribution margin so how much of that comes back to you that is a very important thing as well because gross margin is that product based thing the contribution margin takes into account all the other things that we’ve talked about today that has been your fulfillment charges the things of that nature. It is an absolutely critical ratio that you must must must know but again can be very very difficult to understand sometimes is your acquisition costs to long term value ratio again you don’t want to be spending $80 to acquire a customer who’s going to spend $60 in their life that is just not good value and so you want to understand how much are you spending to acquire customers and how long are they going to come back. You also want to understand the correlation between your row as and your profit margin and and how those two how those two things work together because as you as you get more return on your ad spend I you may be spending more and losing a little bit of profit but you may not but you need to be aware of that and then of course and this is just a calculation that’s a part of the puzzle here you want to understand your land of cost per unit right that’s the only way that you can evaluate. So it’s a really important to understand that and like Jay mentioned one of the best things to do for that is to use tools or dashboards that help to do that you can use tools tools that exist out in marketplace for things that we really enjoy things like sift or a text to zero velocity dashboards those are all really valuable or of course you can talk to Jay and myself and we can help you to find that dashboard for you as well. Finally again if you’re here my my coat for the day and Jay this is not really wasn’t really mine but I’m going to use it anyway if you’re not reviewing your margin monthly you’re guessing not managing and in that really is he’s definitely true right and to some degree like you should even be understanding it more more granularly in that right you don’t need to be going looking at every single day’s transactions or anything like that but you didn’t understand how much margin you have on products so that you know how much each sells really bringing to you. Yeah for sure. Jay are there any metrics or profitability measures that folks should be thinking about as they’re continuing into the holiday season here? No I put everything in there for you. Thanks. But yeah I just want to want to say you know often tell clients you don’t manage your business in the Shopify dashboard you manage it in your GL or your general software or in your I am master inventory management solution you know those are the places where you manage your business because it has more detail and you know like you said dashboards or at you know you pull the data out from your sale system you pull the data out from your inventory system you pull the data out from your meta ads or Google ads or Google Analytics and you compare it you measure it you stack it up period over period and you know you forecast that information to forecast where you’re going and you measure that forecast how good it was and that’s that’s what makes a business and right you know the other thing about these numbers here is you know gross margin will tell you if your product has legs right contribution margin tells you if you’re business has legs yeah and that’s that’s it right there yep and it truly is right you mentioned it right lots of sellers try to live in in Shopify want to understand their revenue trends but it’s really a trend of that contribution margin that really is going to tell you whether or not your business is successful and yeah that’s that’s that’s definitely correct and in the main take away from today right is that that of course that that contribution margin for product is getting a little tighter and there but there are some things that you can do about it and we’ve run through those here and some ways you can know that that’s happening which we’ve run through here as well so in closing Jay right for ecommerce businesses the biggest expense isn’t what you see it’s what you don’t measure rising costs and shrinking margins are the are the silent killer of ecommerce and so it is important to utilize the tools that are available to make sure that you’re you’re you’re not you’re not missing that trend so that’s any any closing thoughts for today’s show Jay yeah I gotta say you hit hit that now on the head you know most ecommerce owners don’t have a profit problem they have a visibility problem because they can’t protect what they’re not measuring right and that’s what it comes down to you know you you can’t measure what you’re doing track so start tracking that’s right yeah if you’re working in the spreadsheets get into a new inventory platform get into a decent GL work with a team like Chris and I and you know we can give you all those insights and allow you to run your company we we will give you the insights so you can chase down that next ad hack because we are we are doing the legwork for you so and that’s what it’s about you know it’s like helping you guys achieve the profit and achieve the life that you are looking for and ultimately so you can sell that that puppy and start a new one that’s right so if you enjoy the show today make sure to subscribe and share it with someone else if you like like the information that we provided or if you’re if there’s something that you’d like to add added in the comments we’d love to see would love to see extra people’s thoughts and then don’t forget to join us next time as we talk about episode three of this cash flow conversation and in that is tackling financing how to find your growth without drowning in debt thanks everyone for joining us for the e-commerce hour today we look forward to talking to you again soon and and wishing everybody some safe trick or treating out there don’t don’t just take the highs of how much candy you win make sure that you’re evaluating how valuable that candy was Snickers bars not skittles Snickers and Reese’s peanut butter cups that’s right right there yes yes sir yes sir happy Halloween everybody thanks for joining the show on the black Friday bye everybody
