Product Sourcing
Moq and Unit Economics: Calculating Real Margins
Minimum order quantities and hidden costs make margins deceptive. Learn to calculate the true cost of a product.
Calculating Real Margins
A nominal margin on paper is not your real margin. Freight, duties, packaging, payment fees, marketplace commissions, and returns all eat into a product's profitability. Calculating true unit economics prevents selling products that lose money.
Build a full cost model
- Unit cost including freight, duties, and insurance
- Packaging and materials per unit
- Marketplace commission per sale
- Payment processing and currency fees
- Projected return and fulfilment overhead per unit
- Platform fees and marketing cost per sale
Beware the minimum order quantity
A low MOQ may look accessible, but shipping and set-up can dominate. Conversely, a high MOQ risks tying up capital in products you cannot sell. Model your margin at the MOQ you can realistically sell through.
Know your true margin before you commit. A disciplined cost model is the difference between a store that grows and one that merely turns over inventory.
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