What Eats the Margin After the Sale

Shipping and packaging as a share of price

Above 15% is red. 8–15% is solid. Below 8% is strong — under two kilograms, compact, robust, and not penalised by dimensional weight.

Bulky and fragile are two separate problems that arrive as one invoice. A product that ships at 18% of its price has already given away a third of a healthy margin before anyone returns anything.

Return risk

Above 20% expected returns is red — the apparel pattern, driven by fit and expectation gaps. 10–20% is solid, and the e-commerce average sits around 19–20%. Below 10% is strong: no fit risk, and expectations you can represent exactly, which is the beauty and supplements pattern.

The caution we print in our own instructions: Germany runs near 44%. Any operator scaling into DACH has to tighten this threshold considerably, and a US-benchmarked model will flatter the product badly.

Supply chain robustness

Single source, a minimum order quantity that locks up more than six months of capital, and a volatile lead time beyond 90 days — red. One or two vetted sources at 45–60 days — solid. Redundant vetted suppliers, flexible minimums, under 45 days, quality control established — strong.

Capacity headroom

Success is a supply problem. Unknown capacity, or less than double current demand with a doubling that takes more than two quarters — red. Doubling within a quarter at known cost — solid. Five times via redundant lines or vetted subcontracting with no capital wall — strong.

Defensibility

Copyable within weeks and already visible on Temu or AliExpress — red. Defensible by contract, customisation or brand, buying months of lead — solid. Structural: exclusivity, design or IP protection, factory lock-in — strong.

Channel control and price integrity

The one operators care about most, and the one producers understand least.

If the producer sells everywhere themselves, Amazon included, below target retail, the operator’s economics are dead on arrival — no amount of skill survives competing with your own supplier on price. Some direct channels with openness to a minimum advertised price policy or a territorial carve-out is solid. A clean channel — contractual price integrity or exclusivity on offer — is strong.

A producer who will not discuss price integrity is not being difficult. They are telling you the partnership does not work, early, which is useful.

Some problems are not scored at all. They end the evaluation — six ways a product dies before it is scored.