Are you a multi-channel e-commerce entrepreneur watching your revenue climb but profits shrink? You're not alone. Many brands struggle with this seemingly paradoxical situation. The culprit? Ignoring contribution margin by channel and SKU.
Many brands focus on constant expansion, adding new products and sales channels without considering profitability. Imagine launching a hot new product on Shopify, then replicating that success across Amazon, brick-and-mortar stores, and every other platform imaginable. While sales might surge, a hidden danger lurks.
The answer lies in a simple concept: contribution margin. This metric reveals a product or channel's true profitability after accounting for variable costs.
Imagine a product with a 10% contribution margin across all channels. It might be a dud, dragging down your overall profitability. Similarly, a seemingly successful channel might cannibalize sales from more profitable avenues.
Jared Ward, Founder and CEO of Luminous, shares a cautionary tale from their own experience. Their company, selling across seven channels with over 2,000 SKUs, discovered that just 10% of products generated 80% of revenue. Worse, some Amazon listings boasted negative contribution margins, actively harming the business.
The key to unlocking hidden profitability is a system that tracks contribution margin by channel and SKU. This empowers you to:
While implementing such a system requires accurate data on inventory, revenue streams, and costs, the rewards are substantial.
Don't let hidden profit drains stall your e-commerce growth. Watch Jared Ward's full video on YouTube to learn how to uncover the contribution margin secrets of your business and unlock the path to sustainable profitability.
Jared Ward built Luminous - an e-commerce ERP system, specifically to address this challenge. Luminous helps you gain data clarity, eliminate performance drags, and steer your business towards sustainable, data-driven growth.
If your brand struggles with profitability amidst rising sales, Luminous can help. Book a demo today and discover how to master your e-commerce operations. Gain control of inventory, streamline supply chain, and scale effortlessly.