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.
Fulfillment Fees That Often Go Unnoticed (But Should Be in Your Ecommerce Accounting COGS)
These common fulfillment charges often slip under the radar—but they should be included in your ecommerce accounting and Cost of Goods Sold (COGS) to reflect true profitability:
- Inbound receiving costs
- Storage by cubic foot or pallet
- Pick & pack per order
- Labeling, inserts, or FNSKU prep
- Shipping box surcharges (especially for bulky items)
For slow movers, these fixed or minimum fees can become margin vampires.
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 to do if “self storage” is not really an option for you
If you are forced to make use of a 3PL here are a couple of tips to consider.
Match 3PL Fees to Inventory Velocity
If you have slow movers, avoid high fixed-fee warehouses. If you can opt for:
- Usage-based pricing
- Pay-as-you-go storage
- Garage-sized self-storage units — In many areas, a 10×10 or 10×15 unit can be rented for $90–$200/month. This can be a cost-effective middle ground if you need more space but aren’t ready for a full-service 3PL. Just be sure to factor in your own time and labor.
Matching your storage solution to your product velocity helps you control overhead and protect your margins—especially in the early or seasonal stages of growth.
Forecast Fulfillment Costs per Unit
Too many sellers think of 3PL as a fixed monthly cost, but that mindset can hide margin killers. To get a clear picture of your true unit economics, you need to break down fulfillment into cost-per-SKU components.
Don’t treat 3PL as overhead. Forecast your:
- Average storage cost per SKU per month
- Pick & pack per order
- Labeling or kitting costs
Include those in your per-unit COGS. If they tank your margins, rethink your setup.
Model Gross Profit by Season
Averages lie. Seasonality matters. If your products sell in bursts—think Q4 gifts or summer gear—you need to analyze how gross profit looks across the entire year, not just in your best months.
Use your sales history to map out:
- Monthly units sold
- Monthly 3PL fees
Then calculate blended gross profit over time—not just in Q4. That’s the real picture.
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.
The Bottom Line
- If your products don’t move fast, flat fulfillment fees can kill your profits.
- If you’re not calculating GP per SKU with full cost allocation, you’re in danger.
- If you’re still running cash-basis books, you’ll miss the slow bleed until it’s too late.
You’re not just managing inventory.
You’re managing unit economics.
The CronosNow Ecommerce Accountant Takeaway
What nearly sank this brand wasn’t weak sales—it was warehousing fees hiding in plain sight. Flat 3PL charges and fulfillment costs masked the true cost of goods sold, creating a false sense of margin and stability.
If you’re not modeling storage and pick fees into your COGS, you’re not protecting profit—you’re bleeding it.
Need help uncovering where your gross profit is really going? We help ecommerce brands build margin-aware fulfillment strategies, model true COGS, and scale with clarity.