Most e-commerce founders track total sales and monthly profit. However, they rarely know the exact profit made on each single order. This gap creates a dangerous situation: scaling unprofitable orders only multiplies losses.
E-commerce unit economics solves this problem by showing how much money one order actually generates after all costs.
What E-commerce Unit Economics Measures
E-commerce unit economics answers one specific question: after selling one product and paying all related costs, how much cash remains?
This calculation happens at order level, not company level or month level.
For example, a product sells for ₹1,000. After deducting product cost, platform commission, shipping, payment charges, advertising cost, and return logistics, only ₹100 remains. This ₹100 represents true unit economics.
Without this clarity, businesses confuse revenue growth with profit growth.
Why Sales Price Alone Misleads Business Decisions
Two products can have identical selling prices but completely different profitability.
Consider this comparison:
| Product | Selling Price | Net Contribution |
| Product A | ₹1,000 | ₹180 |
| Product B | ₹1,000 | ₹40 |
Product A generates 4.5 times more cash per order than Product B, despite identical pricing. Therefore, tracking unit economics per product becomes essential for accurate decision-making.
How to Calculate E-commerce Unit Economics (Step-by-Step)
Here’s a practical calculation for one order:
| Particulars | Amount (₹) |
| Selling Price | 1,000 |
| Less: Sales Returns (10%) | (100) |
| Net Realised Sales | 900 |
| Less: Product Cost (COGS) | (400) |
| Less: Platform Commission | (120) |
| Less: Shipping & Packaging | (90) |
| Less: Payment Gateway Charges | (20) |
| Less: Advertising Cost per Order | (130) |
| Less: Return Logistics Cost | (40) |
| Net Contribution per Order | 100 |
This structure reveals actual cash retention per order, not assumed margin.
Platform-Wise Unit Economics: Why Same Product Shows Different Profitability
The same product generates different unit economics across platforms due to varying commission structures, return rates, and advertising costs.
Example: ₹1,000 Product Across Three Platforms
| Particulars | Amazon | Myntra | Own Website |
| Selling Price | 1,000 | 1,000 | 1,000 |
| Return Rate | 12% | 18% | 6% |
| Net Sales After Returns | 880 | 820 | 940 |
| Platform Fees | (140) | (160) | (40) |
| Shipping Cost | (90) | (100) | (70) |
| Advertising Cost | (120) | (140) | (110) |
| Product Cost (COGS) | (400) | (400) | (400) |
| Net Contribution | 130 | 20 | 320 |
As shown, Myntra delivers high volume but weak profitability. Own website generates lower volume but stronger unit economics. Amazon sits between both.
Consequently, platform-wise unit economics tracking prevents misleading aggregate profit reporting.
Five Expense Areas That Break Unit Economics
1. Returns and RTO (Return to Origin)
Returns reduce realised sales and increase reverse logistics cost. Even a 5% increase in return rate significantly impacts profitability. Therefore, return rate must be calculated per product and per platform.
2. Advertising Cost Per Realised Order
Many sellers calculate ROAS (Return on Ad Spend) based on gross sales. However, unit economics requires calculating advertising cost per completed order, not per placed order. This distinction changes pricing and scaling decisions.
3. Platform and Payment Charges
Platform commission and payment gateway fees together consume 15–25% of selling price. These charges appear small individually but accumulate significantly at order level.
4. Fulfilment and Reverse Logistics
Reverse shipping cost belongs to the product’s total cost structure. Excluding it inflates margin calculations artificially and distorts profitability analysis.
5. Inventory Holding and Damage
Slow-moving inventory increases storage cost, damage risk, and obsolescence. These costs must be allocated to unit economics, not treated as general overhead.
Practical MIS Structure for Tracking Unit Economics
An effective unit economics MIS answers three questions:
1. How much cash is actually collected per order?
Calculate net realised value after returns, cancellations, and refunds—not order value.
2. What does one order fully cost?
Include product cost, platform charges, logistics, advertising, and reverse logistics not just COGS.
3. How much remains per order?
This leftover indicates cash buffer, growth capacity, or loss situation requiring immediate correction.
Why Unit Economics Must Stabilise Before Scaling
Scaling before stabilising unit economics creates:
- High sales with low cash retention
- Working capital pressure
- Discount dependency
- Continuous funding requirements
In contrast, businesses stabilising unit economics first grow sustainably with financial control and confidence.
Conclusion
E-commerce unit economics is not a theoretical finance metric. It reveals whether one order generates genuine profit or hidden loss.
If one order loses money, selling 1,000 orders only magnifies the problem.
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