Your fastest-selling product can be less profitable than a slower item. Sales volume tells only part of the story.
The price paid by a customer still needs to cover the item cost, payment fees, packaging and other variable expenses.
In a hypothetical example, one item leaves $4 per sale while another leaves $20. Their sales volumes matter too.
Subtract variable costs from the selling price. Then compare the margin per item with how often it sells.
Slow-moving inventory ties up money and space. A high margin is less useful if products rarely leave the stockroom.
A promotion may increase orders but shrink contribution margin. Recalculate the numbers before celebrating more sales.
Compare margin, turnover and cash needs before ordering. Read the complete guide for a simple product check.
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