How bad can it really be?

I strutted into my annual check-up like a man ordering fries with a side of confidence. This was going to be a walk in the park. My plan was simple. I was going to grab my cholesterol pills, smile politely, and be out the door before you could say “blood pressure.”

Moments later, in walked my doctor—a five-foot-nothing woman, radiating warmth with a friendly smile that instantly put me at ease.

I’m six foot three and, shall we say, comfortably insulated. The optics were comical: me towering like a redwood, her peering up like a determined squirrel with a clipboard. We exchanged smiles. So far, so good.

She sat down, opened my chart… and the smile vanished. In its place: a pair of well-worn frown lines and an ominous silence that settled over the room like a cold fog.

Doctor (looking up at me): “Shaun, your BMI is off the charts—if they gave medals for mass, you’d be on the podium.”

Me (nervous chuckle): “Well… good to know I excel at something?”

Doctor: “Nice try. The healthy cholesterol range is 4. You’re sitting at 8. That’s a fast track to a heart attack if we don’t make changes.”

Vital Sign#1: Gross Profit Margin %

• What it is: The percentage of revenue left after deducting the cost of goods sold.
• Why it matters: It funds your advertising, overhead, and ultimately determines your profitability.
• Target: 50%+ for DTC, 30-40% for resellers or wholesale
• Warning Zone: Below 30% (limited room for ads, ops, profit)

Vital Sign#3: Break Even Point

• What it is: The breakeven point, represents the revenue level at which total income equals total costs—resulting in zero profit or loss
• Why it matters: It helps identify the minimum level of sales required to avoid losses and includes important insights such as margin of safety and contribution margin. A clear understanding of your breakeven point allows for better cost management, pricing strategy, and financial planning.
• Another way to look at it: You can also calculate breakeven in terms of units sold: This tells you how many units you need to sell to cover all your fixed and variable costs. It’s especially helpful for product-focused businesses aiming to set volume goals or pricing strategies.
• Target: Break-even within 3–6 months for new customer acquisition
• Warning Zone: Beyond 12 months or unclear break-even point

Vital Sign#5: Shipping & 3PL (Net Shipping) % of Gross Revenue

• What it is: The net cost of warehousing, fulfillment, and shipping as a share of revenue.
• Why it matters: These costs eat into margin quickly, especially with free shipping offers.
• Target: 5-15% depending on weight and region
• Warning Zone: Above 20%

Vital Sign#7: Refunds % of Gross Revenue

• What it is: The percentage of revenue lost to returns or refunds.
• Why it matters: High refunds point to product quality or fulfillment issues.
• Target: < 5%
• Warning Zone: > 10% (product/CX problems likely)

Vital Sign#9: Nett Profit Margin %

• What it is: The percentage of revenue left after all expenses are paid.
• Why it matters: It determines your true profitability and long-term viability.
• Target: 10-20%
• Warning Zone: Below 5% (unless reinvesting aggressively)

The next Willy Wonka?

In high school, I thought I’d cracked the code to easy money. I started buying popular candy bars in bulk and selling them at a markup to my classmates. Sales were strong, the margins looked ok, and I felt like a young entrepreneur on the rise.

But there was one problem—I loved those candy bars too much. After making a few sales, I’d reward myself by eating one… then two… because, hey, I deserved it. I was working hard, right?

Soon enough, my profits were gone, my inventory vanished, and the business collapsed. I wasn’t running a candy empire—I was literally eating my own profit.

Decades later, I see eCommerce sellers making the exact same mistake. Not with chocolate—but with poor cash flow habits that even a great ecommerce accountant could warn you about.

From Candy Bars to Capital Burns: The Modern Version of This Mistake

You might be hitting $100K, $500K, even $1M in revenue. Your gross profit margin might look good on paper. But if you’re pulling too much money out of the business to fund your lifestyle—luxury purchases, inflated salaries, or even just poor cash discipline—you’re eating your own profits. Just like I did.

It’s deceptively easy to do.

eCommerce businesses are cash-hungry. Between inventory deposits, ad spend, freight bills, and platform fees, the money you see in your bank account isn’t all yours to spend. And if you treat it like it is, you will starve the business of what it needs to survive: working capital.

What to Watch Below the Gross Profit Line

You might think: “My gross profit margin is strong, so I’m fine.” But your P&L (Profit & Loss statement) has a second act—below the gross profit line—where profit vanishes fast if you’re not careful. This is where a skilled ecommerce accountant can help you stay ahead of hidden risks.

1. Overpaying Yourself Too Soon

Drawing a large salary before your business can support it is a common early-stage mistake. Just because revenue is flowing doesn’t mean profit is.

2. Bloated Subscriptions & Overhead

A new app here, a new tool there—it adds up. Many sellers forget to regularly audit their tech stack and recurring expenses.

3. Ad Spend With No Profit Backing It

Ad platforms will take every dollar you feed them. But if you’re scaling ads on slim margins, you’re spending future profits you don’t yet have.

4. Big Inventory Orders Without the Margin to Support It

If your margins are too slim and you’re paying yourself out of the business, there may not be enough cash left for the next PO (purchase order). This is how businesses stall.

The Cost Trap: Why Selling One Apron Wasn’t Working

Sandra thought she had a simple business model—she sold aprons on Amazon. But when her bank balance didn’t match her growing order volume, she turned to CronosNow eCommerce Accountants. The surprise? a hidden profit leak tied to how she was selling her products, not just how many she was moving. The fix was shockingly simple—bundles.

When we analyzed Sandra’s SKU profitability, we noticed something incredibly common in eCommerce: her fulfillment cost per order was fixed, regardless of how many aprons she shipped.

• FBA Pick & Pack Fees? Same whether it was 1 apron or 5.
• Packaging, labeling, warehousing fees? Mostly fixed per shipment.
• Customer service and return logistics? Didn’t scale linearly either.

In short, the cost to ship a single apron was nearly identical to the cost of shipping a 5-pack. Because she priced individual aprons too low—trying to stay “competitive”—her per‑unit margin was razor‑thin. Bundling turned fixed fees into profit amplifiers.

Anchoring Price: The Psychology That Makes Bundles Work

1. Raise the price of the single apron.

She was selling it for $12.99. We helped her reposition it at $18.99. This did two things:

• Anchored the value—customers now believed the apron was worth nearly $20.
• Set up a value contrast when presented with the bundle.

2. Introduce 3-pack and 5-pack bundles.

• 3-pack at $45 ($15 per apron)
• 5-pack at $65 ($13 per apron)

3 Watch the profit roll in

Suddenly, customers had a reason to buy more:

• Better price per unit
• Felt like they were getting a deal
• Made sense for gifting or group purchases

And here’s the kicker: Sandra made nearly the same profit per unit on each sale, but customer AOV (average order value) jumped 3x to 5x.

DOES INCREASING PRICES
NOT LEAD TO LESS SALES?

“But Shaun, You Sly Fox… What about her competitors who were selling cheaper than she did? Didn’t she lose out on sales?”

Great question—and yes, she did see a dip in sales volume.

However her buy box was “protected”. She had registered her business under the Amazon Brand registry program which meant that other sellers could not easily sell her products and push her prices down. She therefore had more control over the buy box.

When Sandra raised her price and stopped trying to be the cheapest option on Amazon, a few bargain-hunters bounced. But what happened next was far more important:

1. Higher Profit > Higher Volume

Even though she had fewer orders at first, each order was more profitable and due to the bundles her unit volume actually increased.

Her gross profit per order increased significantly as well, and her fulfillment costs remained flat. That meant more money in the bank—despite slightly lower volume.

Let’s put it simply: It’s better to sell 100 units at $7 profit than 130 units at $2.

2. She Upgraded Her Listings to Match Her Price

Sandra didn’t just raise her price and pray. She took the time to:

• Invest in better product photography
• Rewrite her product descriptions with stronger brand voice
• Add comparison tables that clearly highlighted her apron’s premium features

The result? Her listing didn’t just look more expensive—it looked worth more. She began to attract customers who were buying for quality, not just price.

3. She Anchored Value and Created Desire

By positioning the single apron at a higher price point, her bundles felt like a deal. It tapped into classic buyer psychology: the “discount” on a 3-pack or 5-pack only made sense because the solo price was clearly established. That anchoring effect made the bundles feel smart—not indulgent.

So yes, she lost some orders. But she gained control over her margins, improved brand perception, and made more profit in the process. And ultimately, that’s what keeps the business alive—not being the cheapest.

Related: The 6 Gross Profit Mistakes That Could Be Killing Your Business

Promotions AND DISCOUNTS:

A Double-Edged Sword

Peter was thrilled. His fresh food subscription box had crossed $500,000 in revenue.

Customers were buying. Ads were converting. But behind the scenes, Peter was quietly drowning.

Despite the flashy sales, his gross profit margin had shrunk so low that he was losing money on every box.

And a big part of the problem? He had discounted himself into a corner.

Discounts, promotions, and BOGO (Buy One Get One) deals are a tried-and-true method for boosting short-term sales.

But for many eCommerce sellers, they’ve become the default—not the strategy.

When used without a clear understanding of unit economics, promotions can quietly obliterate your margins.

The Problem with
Over-Discounting

Discounts feel great in the moment. Sales spike. Conversion rates jump. You feel like a genius. But the real question is: what did it cost you?

Here’s a simplified view of what most eCommerce founders miss:

In the BOGO example, yes—you moved two units. But you halved your profit margin. In some cases, like Peter’s, you actually lost money when factoring in fulfillment, marketing, and platform fees.

Why This Happens: The “Discount Illusion”

Here’s what sellers often forget:

• Every promotion is paid for out of your Gross Profit
• If your GPM is already under 50%, you have very little room to discount
• Discounts lower your margin and delay your reorder cash flow

When Discounts Make Sense

Discounting isn’t evil—but it has to be strategic.

Discounts can work when:

• You’re launching a new product (with planned customer acquisition cost (CAC))
• You have very high GPM (65%+) and room to test
• You’re clearing end-of-life SKUs or excess inventory
• You’re bundling to increase AOV, not lower perceived value
• You generate a lot of recurring revenue from the same customer without additional ad spend.

Instead of flat discounts, consider:

• BOGO at a surcharge (e.g., “Buy one, get one 50% off”)
• Bundles with upsell value (e.g., add a sample for $5)
• Minimum cart disc

CAUGHT IN TRAP AND I did not EVEN KNOW IT

As eCommerce sellers, we often obsess over product quality, pricing strategy, and shipping logistics. But what if you’re doing everything right—and still losing money?

That’s exactly what happened to me a few years ago.

I was running a small online store selling luxury handmade African chess sets. These weren’t impulse buys. They were high-ticket, artfully crafted products with solid margins and loyal customers. I was methodical:

• ✅ I used sea freight to keep shipping costs down.
• ✅ I ordered in bulk, optimizing inventory costs.
• ✅ I adjusted SKU reorder quantities based on sales data.
• ✅ My gross profit margins looked great on paper.

And yet… I lost money every single month.

The Real Culprit?

My chess sets were slow movers. They didn’t sell every day. They spiked during holidays—especially Father’s Day and Q4—but sat idle for months in between.

But here’s what I missed: I was using a third-party logistics (3PL) provider that charged flat monthly warehousing fees.

Flat fees are great—if your products are flying off the shelves. Mine weren’t. So each month, I paid the same amount to store pallets of unsold inventory… slowly bleeding cash. I thought I had strong gross profits. But what I really had was a margin illusion.

Why Fulfillment & Warehousing can be Gross Profit Killers

Fulfillment and storage fees can and should be included in your Cost of Goods Sold (COGS). But many ecommerce sellers treat them like fixed overheads. That’s dangerous—especially when:

• Products have long shelf lives or seasonality
• Order volumes are inconsistent
• You’re paying for space, not usage

Let’s say your chess set costs $40 to make, and you sell it for $120.

GP Margin = ($120 – $40) ÷ $120 = 66% — Great, right?

But if you’re paying $1,200/month in warehouse fees and only selling 50 units/month, that’s another $24 per unit in hidden cost. Your real COGS is $64. Suddenly, your GP margin shrinks to 47%—and that’s before ads, returns, or payment fees.

The Warehousing Trap in Seasonal eCommerce

My chess sets weren’t a daily-use item. Most sales came in seasonal bursts.

But my 3PL didn’t care. They billed me like I was a skincare brand turning stock weekly.

This mismatch between inventory velocity and fulfillment pricing model meant that low sales months crushed my margins, even when high-season revenue looked promising.

Use Your Garage Before You Use a 3PL

If you’re just starting out—or even if you’re doing a few thousand dollars in monthly sales—there’s a good chance you don’t need a third-party logistics provider (3PL) yet.

One of the most cost-effective moves you can make is to use your garage, spare room, or even a corner of your living room as your warehouse.

Before you commit to monthly fees, minimum storage charges, and pick & pack costs, ask yourself:
“Can I store this myself for now?”

Why it works:

• No fixed warehousing fees eating into your margins.
• Easy access to inventory so you can personally inspect, package, and ship orders if needed.
• Flexible scale—as sales grow, you can expand shelving and organize better.
• Cheaper setup—a few industrial shelves and shipping supplies can go a long way.
• Sunken cost – you’re already paying for the space, so you might as well utilize it to its maximum value.

This option isn’t glamorous, but it can help you keep your burn rate low while proving your product-market fit.

Once you’re shipping 200+ units a week or need multi-channel fulfillment, then it’s time to model the true COGS impact of outsourcing.

Don’t jump into a 3PL too early. Your garage might just be the best warehouse you’ve got.

What This Taught Me

• I didn’t have a pricing problem.
• I didn’t have a product problem.
• I had a cost visibility problem.

This is the same mistake we see again and again at CronosNow. Sellers with decent revenue, solid products, and growing customer bases—but messy numbers that hide the truth.

Without accurate cost data that reflects fulfillment, storage, and timing, you’re flying blind.