What is a good product margin in ecommerce?

70% margin on products used to be the benchmark.

Coaches preached it. Founders chased it. And for a long time, if you were sitting at 70%, you felt like you had the business figured out.

You don't anymore.

The cost of doing business has gone up. A lot. And the brands still targeting 70% are getting squeezed. Slowly. Quietly. Until there's nothing left.

Let me show you the math.

Say you're doing $2M in revenue. At 70% margin, you've got $1.4M left after COGS.

Sounds good. Feels good.

But then the bills start landing.

3PL and warehousing? Up. Shipping costs? Up. Return rates? Up. Staff? Up. Meta CPMs? Way up. Shopify fees, apps, tools, all creeping.

By the time OPEX takes its bite, you're looking at a net margin of 8–12% if you're lucky. That's $160–240K on $2M. Before tax. Before paying yourself properly.

That's not a business. That's a treadmill.

Now run the same numbers at 75% margin.

$1.5M left after COGS. That extra $100K sitting above the line changes everything. It absorbs the OPEX increases without destroying your net.

5 percentage points doesn't sound like much.

It's the difference between profitable and pretending.

Here's what most founders get wrong.

They confuse intake margin with exit margin. They are not the same thing.

Intake margin is what you calculate when you're buying stock. Your cost price vs your sell price, before anything else touches it. It's the margin that looks great in a buying meeting or on a spreadsheet.

Exit margin is what actually lands in your pocket after the product has been discounted, and refunded. Often, there is a difference of at least 5%.

Brands are building their business model on their intake margin, and wondering where it all went wrong. Exit margin is key.

Intake margin is a promise.

Exit margin is reality.

A product you're buying at 72% intake margin sounds like a winner. But apply a 10% discount across your sales and a 10% refund rate where you lose the stock, and your exit margin drops to around 65%.

That's a problem product dressed up as a profitable one.

So what do you do?

Start by knowing the difference. Map your exit margin by product category, not just your blended intake number.

If you find products with exit margins under 70%, you’re up against it. No room to move on ads for example.

Cut them, reprice them, or stop reordering them.

Then set 75% as your new intake margin floor for any new product. Not 70. Not "close to 70 if it sells well." Now, if you have some products on a PO (purchase order) at 65% and others at 80%, I’m ok with that - check that the blended margin of the PO comes out at 75% when you buy it.

The cost of doing business isn't going back down. Build that reality into your buying, not your excuses.

Swing the axe.

Need help? Let’s chat: Book a time here.

Until next week, Paul

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