The Margin Math That Kills Most DTC Products

1 — Gross margin, landed

Price minus landed cost of goods — including freight, duties and inbound — over price. Not ex-works cost. The number that reaches your bank.

Under 55% is a red field. 55–70% is workable. Above 70% is strong.

Below 55% there is nothing left to buy customers with. The classic rule of thumb of a 3–5× markup exists for this reason, and it is a floor, not an ambition.

2 — Absolute margin per order

The one almost everyone skips, because percentages feel like the real number. They are not: customer acquisition is paid in euros, not in percent.

Under €20 of gross profit per order is red. €20–50 is solid. Above €50 is strong.

An 80% margin on a €15 product is €12. There is no advertising strategy that survives €12.

3 — Price point

Under €40 or above €250 is red. €40–90 is solid. €90–200 is strong.

Below €40, acquisition cost eats the margin. Above €250, cold traffic will not convert without a long consideration cycle you have to fund. Between €90 and €200 there is enough buffer to pay for a customer while the purchase is still close to impulse. Natural bundles count toward the target price.

4 — CAC headroom, expressed as break-even ROAS

One divided by your contribution margin ratio after fulfilment, shipping, payment and a returns reserve — before ads. It is the return on ad spend you must hit to make exactly nothing.

Above 3.0 is red. 2.0–3.0 is solid. Below 2.0 is strong.

Above 3.0 every increase in ad costs is lethal, and ad costs increase. Below 2.0 you can absorb a bad quarter, test more creative, and outbid people who cannot.

Why these four are treated as near-knockouts

Direct-to-consumer growth is financed out of margin. Every other strength on the sheet — a brilliant product, a rising category, a founder who films well — converts into revenue only by spending money to reach people. If the margin is missing, the only thing that scales is the loss.

So two or more red fields here and the evaluation stops. Not “scores lower.” Stops.

The honest caveat

Category matters more than the table. Food at 48% is a real business; beauty at 48% is a warning. Margin, repeat rate and return risk all have to be re-anchored to the category before the thresholds mean anything. What does not move is the absolute euro figure — €12 of gross profit is €12 in every category.

Run your own numbers first. If they clear, apply to Y-Score — thirteen questions and a human decision in three business days.