Insights / Topic

The Unit Economics: the decisions that connect the other four.

P&L ownership, contribution margin, pricing, forecasting and vendor management.

What is contribution margin in eCommerce?

Contribution margin is what a sale leaves after the costs that scale with it: product cost, shipping and fulfilment, payment and marketplace fees, returns, and the ad spend that won the order. It is the number that tells you whether growth is making money. Gross margin alone hides shipping, returns and ad cost, which are often where the profit goes.

Measure it by SKU, by pack and by channel. Most brands cannot say which products make money after shipping, returns and ad cost, and that gap drives a lot of bad decisions.

How should a DTC brand set prices and packs across channels?

Start from contribution margin by channel, not from a single list price. A pack that works on your own store can lose money on Amazon after fees, or undercut your site if it sells cheaper there. Pack architecture (sizes, bundles and multipacks by channel) lets each channel hit its margin without the channels competing on price for the same customer. See the marketplaces for how this plays out on Amazon.

Who should own the eCommerce P&L?

One person or team with the authority to make the calls: the plan, the spend inside an agreed budget, pricing and promotions, and the agencies. When the store, Amazon and paid media each report to different people, every channel can look healthy while total contribution goes sideways.

When digital revenue is meaningful but a full-time Head of eCommerce is not yet justified, a fractional operator can own that line for a fixed term and hand it back running.

How do you hold agencies accountable?

Give each one a number tied to contribution, not a platform metric, and review it against the same P&L everyone else sees. Brief them properly, share the data they need, and replace the ones that do not deliver. Four agencies each with a reasonable explanation and none accountable for the result is a structure problem, not a talent problem.

We own the P&L line: contribution margin by SKU, pack and channel, pricing, forecasting and agency management, with one team answering for the result. See how an engagement works, or what that looked like for other brands.

Field notes on the Unit Economics

  • The Unit Economics 5 min read

    Contribution margin for ecommerce: how to calculate it by SKU

    Contribution margin is what an order leaves you after every cost that moves with that order: product cost, discounts, fulfillment, shipping, payment fees, returns and the marketing it took to win it. Gross margin stops after product cost, so it can make a SKU look healthy when it loses money. Calculate it per SKU and per channel, and use it to decide what to promote, price up or cut.

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  • The Unit Economics 5 min read

    Fractional vs full-time Head of eCommerce vs an agency

    A full-time Head of eCommerce gives you a permanent owner with all their hours. A fractional Head of eCommerce gives you the same ownership and decision rights part time, for a fixed term, and can start sooner. An agency executes a defined scope but does not own the business result. Hire full time when the role is full and the playbook works, go fractional when you need senior ownership now, and use agencies for execution under whoever owns the number.

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  • The Unit Economics 5 min read

    How much does a fractional Head of eCommerce cost?

    A fractional Head of eCommerce is usually paid a flat monthly retainer for a fixed weekly time commitment, though some work hourly or charge a fixed fee for a defined project such as an audit. The price varies with the hours, the number of channels in scope, and how much decision authority the role carries. Compare it with the fully loaded cost of a full-time hire, not just the salary, and ask what result the fee is buying.

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  • The Unit Economics 3 min read

    What does a fractional Head of eCommerce do, and when does a brand need one?

    A fractional Head of eCommerce owns the digital business part time: the store, the marketplaces, paid media and the P&L behind them, with real decision rights and a fixed term. Brands usually need one when digital revenue is meaningful but nobody senior owns it, and a full-time hire is not yet justified.

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Questions

Frequently asked questions.

What is the difference between gross margin and contribution margin?

Gross margin subtracts product cost from revenue. Contribution margin also subtracts the variable costs of getting each order to the customer: shipping, fees, returns and acquisition spend.

When does a brand need a fractional Head of eCommerce?

Usually when digital revenue is meaningful, nobody senior owns it end to end, and a full-time hire is not yet justified or the role is not yet defined well enough to hire for.

How accurate should an eCommerce forecast be?

Accurate enough to make inventory and cash decisions, and improving. Track forecast against actuals every month and report the miss alongside the reason.

How we run this

The Unit Economics, run as part of one business.

We own the P&L line: contribution margin by SKU, pack and channel, pricing, forecasting and agency management, with one team answering for the result.

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