Is a 60% margin product better than a 25% margin one that earns more money per sale?
Margin alone cannot decide it. The calculator shows profit in money next to the margin percentage, and the two often rank products differently. The better product is the one that leaves you more money after the costs every order carries, multiplied by how many you can actually sell.
Two products in one shop
You sell phone cases costing 10 at 25, and smartwatches costing 150 at 200. Run each in the Profit margin calculator:
Phone case: profit 15, margin 60%.
Smartwatch: profit 50, margin 25%.
Rank by margin and the case is the star. Rank by profit and the watch earns more than three times as much per order.
First: the fixed costs of each order
Every order carries costs that barely change with the product's price: the ad that found the customer, packaging, a payment fee, perhaps shipping you absorb. Say they come to 12 per order in both cases, and add them to the cost:
Phone case (cost 22, price 25): profit 3, margin 12%.
Smartwatch (cost 162, price 200): profit 38, margin 19%.
The ranking flipped. The cheap product's high margin assumed an order costs nothing beyond the product itself, which is rarely true. Once order costs come in, profit in money is what has to carry them.
Second: how many can you sell?
Suppose you want 3000 a month in profit from one product, before order costs. That takes 200 cases at 15 each, or 60 watches at 50. Which is easier in your market? Cases usually sell in larger numbers, but 200 orders means 200 parcels and 200 customer chats. Watches need fewer customers, but each one is harder to convince and dearer to reach with ads.
There is no general answer. The calculator gives you the two correct figures for each product, and you set them against what you know about your market: order volume, customer acquisition cost, storage space and the cash tied up in stock.
A practical way to compare
- Enter each product with its own cost only, and note profit and margin.
- Enter it again with your average order costs added to the cost.
- Multiply the second profit by the number of units you really sell in a month.
- If you have fixed monthly overheads, work out how many units of each product cover them with the Break-even calculator.
Common questions
Should I drop products with a small profit per sale?
Not necessarily. A cheap product may bring in the customer who later buys something expensive. But know its real profit after order costs before you spend on advertising it.
Which figure goes in my monthly reports?
Both. Margin compares how efficient products are; profit in money tells you what actually reaches your account.