“Gross margin looks fine right up until you land the returns.”
Gross margin is calculated at the point of sale and eroded everywhere afterwards — discount, markdown, returns, fulfillment, platform fees. Realized margin by SKU is a different ranking from reported margin, and often a surprising one.
realized margin
markdown
shrinkage
sell-through
cost to serve
returns rate
supplier funding
contribution
Your words, not ours.
Where it concentrates here
Five places the money tends to
go in retail and e-commerce. Each one is concentrated — a single agreement, a single queue,
a single account nobody reviews — which is why sampling walks straight past them.
Returns cost — processing, refurbishment, disposal — carried centrally and never allocated to the category generating it.
Marketplace and platform fees, including advertising, taking a share that is not in the product margin calculation.
Markdown applied to clear stock that was over-bought, with no feedback into the next buying decision.
Shrinkage concentrated in a small number of sites or SKUs and reported as a company percentage.
Supplier funding and rebates agreed and not fully claimed.
Not every retail and e-commerce is the same business
Direct-to-consumerContribution margin per order swamped by shipping, returns and discounting that are reported separately from the product margin they erase.
Wholesale and multi-channelChargebacks, co-op allowances and compliance deductions from retail partners, absorbed rather than disputed within the window.
Bricks and mortarStore-level four-wall economics where occupancy and labor are allocated by a formula older than the current store mix.
Marketplace sellersPlatform fees, storage and long-term storage charges that change the unit economics of slow SKUs without anyone re-pricing them.
Subscription and replenishmentChurn and cohort economics measured in aggregate, hiding a cohort that has never repaid acquisition cost.
Where this data actually lives
Shopify Plus, BigCommerce or Magento; NetSuite or Brightpearl behind them
A 3PL or fulfillment partner whose invoice is not reconciled to the order file
Ad platforms reporting attributed revenue that the finance system never sees
A returns process tracked in the helpdesk rather than in inventory
Named because it changes what the intake asks for. An extract from one of these has known gaps, and the review is built around them rather than surprised by them.
Reported in your numbers, not ours
contribution margin per order
return rate
cost per acquisition
cohort payback
inventory turns
sell-through
chargeback rate
four-wall margin
The obligations that set the deadlines
Sales tax and economic nexus across states, and marketplace facilitator rules
Customs, duty and country-of-origin documentation on imported goods
Product compliance and labeling where the category requires it
PCI DSS scope, and whether it is as small as you think
What the review would ask you for
8 requests written for retail and e-commerce
and asked of nobody else — 3 of them core. They sit alongside
the operating spine every business has — finance, revenue, receivables,
payables, contracts, people, IT, operations, risk, commercial and governance
— which is 107 further requests.
Sales by channel, category and month Core
Gross margin by SKU and category CoreAfter discount, markdown and returns. Reported margin and realized margin rarely match.
Inventory by age and location CoreIncluding obsolete and aged stock.
Shrinkage and stock lossBy site, with investigation outcomes.
Returns and refundsRate by channel and category, and the cost to process.
Fulfillment and last-mile costPer order, by channel.
Marketplace and platform feesCommission, advertising and fulfillment fees.
Promotional spend and its measured effectIncluding supplier funding.
Anything you do not have can be skipped in one
click, with a reason. The intake is completed in the
client portal, which saves each answer as it is given and can be
returned to as often as you like.
When this stops being interesting and becomes urgent
A shipping or fulfillment rate increase that nobody has modeled through to margin
A tariff change on a sourced category
A returns rate that moved and nobody can attribute it
A funding round or sale, where contribution margin by SKU is requested
A state sales tax notice
Who this involves
Signs it: Founder, CEO or CFO
Resists it: Merchandising and marketing, whose discounting and spend become attributable
Has been asking for it: Operations and finance, who suspect which SKUs lose money
Who commissions it
Finance directors, heads of trading and operations. Phase one is priced before phase two is
discussed, the report is yours either way, and we take no vendor commissions or referral
fees on anything we recommend.
The proposal sets out the sequence week by
week, what we would need from you, and what it costs for your number of operating
units. No call required to see the number.
Closest to this
Operations that share more with retail and e-commerce than the sector label
suggests.