Own-brand unit economics means working out what each unit earns after every variable cost: the price you receive, less landed cost, channel fees, returns, promotions and customer acquisition. What remains is the contribution per unit, and it must cover your fixed costs at a volume you can realistically reach. A brand can look profitable on a spreadsheet using factory price and retail price alone, then lose money on every sale when the real costs arrive.
Build the numbers in this order
- Net selling price. Start with the shelf or web price, remove sales tax, and subtract any discount or promotion you expect to run on average. In wholesale, this is the price the retailer pays you, not the shelf price.
- Channel fees. Marketplace referral and fulfilment fees, or retailer rebates, listing costs, payment fees and distributor margin.
- Landed cost. Unit price, packaging, inbound freight, duty, insurance, inspection, and a share of tests and tooling.
- Outbound logistics. Warehouse handling and delivery to the customer or retailer.
- Returns and defects. Refunds, reverse shipping and unsellable stock, as an average per unit sold.
- Acquisition. Advertising and other marketing per unit sold.
Contribution per unit = net selling price minus all of the above.
A worked example
These figures are invented to demonstrate the mechanics. Neither the numbers nor the percentages are benchmarks. Replace them with quotes for your own product.
| Line | Online, per unit | Retail via distributor, per unit |
|---|---|---|
| Consumer price, with tax | €24.00 | €24.00 |
| Net of 20% tax | €20.00 | €20.00 |
| Retailer margin at 40% | n/a | −€8.00 |
| Distributor at 25% of the remainder | n/a | −€3.00 |
| Marketplace fee at 15% | −€3.00 | n/a |
| Fulfilment | −€3.50 | −€0.40 |
| Landed cost | −€6.00 | −€6.00 |
| Returns and defects | −€1.00 | −€0.20 |
| Promotions | −€0.50 | −€0.80 |
| Advertising | −€3.00 | n/a |
| Contribution per unit | €3.00 | €1.60 |
Two things stand out. First, a product with a landed cost of €6 and a shelf price of €24 looks like a fourfold markup, but contribution is only €1.60 to €3.00. Second, the retail route earns less per unit, but with less advertising risk and potentially much higher volume. Neither column wins automatically.
Break-even, in units
Break-even units = fixed costs ÷ contribution per unit. Take fixed costs of €30,000 a year, again invented, covering staff, software, insurance, trademark upkeep and accounting. At €3.00 per unit you need 10,000 units a year, about 833 a month. At €1.60, you need 18,750. Now ask the honest question: what evidence do you have that the channel can provide this volume?
Add one-off costs separately, since they need paying back. If design, tests, tooling and trademarks cost €20,000 in this example, that is 6,667 further units at €3.00 before the investment has been recovered.
Run the three tests that change decisions
- Sensitivity. What happens if freight or duty rises, or advertising costs double? In the example above, a €3 rise in advertising per unit takes the online contribution to zero. Tariffs and fees do change, so a margin that only survives under today’s rates is fragile.
- Price. If you must discount to sell, recalculate. A 20% price cut in the online example lowers the net price by €4, and even after the €0.60 saved on the percentage fee, the contribution turns negative at €-0.40.
- Repeat rate. If customers return without new advertising, a low first-sale margin can make sense. If your category has few repeat purchases, it probably cannot. Do not assume repeat orders without evidence.
Cash is a separate question
Unit economics can be fine while the business still runs out of cash. You pay a deposit, then the balance, freight and duty, often months before you receive money. In retail, payment terms may add further months. Draw a simple timeline, week by week, with all payments and receipts for the first order and a reorder. A brand with positive contribution can still fail if a reorder is due before the first order’s cash returns.
Then look at stock risk. A larger order may lower the unit price and raise the margin on paper, while tying up cash and creating possible write-offs. See the MOQ guide for how we think about this trade-off.
Compare channels on the same sheet
Put every channel you are considering side by side, as in the table above. A blended average hides the channel that loses money. If one route carries the brand while another drains it, you want to see that before stock is allocated, and not when the accounts arrive.
Costs people leave out
- Samples, repeat tests and inspection
- Local representatives and registrations in each country
- Packaging EPR fees. In the UK and EU these depend on your packaging data and national schemes
- Currency swings between order and sale
- Slow stock: storage, then markdowns
- Liability insurance, recall planning
- Your own time
How to decide
| Finding | What to do |
|---|---|
| Contribution is negative after realistic costs | Stop. Change price, cost, channel or product |
| Positive, but break-even needs volume you cannot evidence | Narrow the range, test smaller, or wait |
| Positive, and survives sensitivity tests | Proceed, with a small first order and clear measures |
| Strong margin, with cash gap | Reduce the first order, or arrange funding first |
Published ranges and rules of thumb are tempting, but your own quotes are better. We would rather tell you not to proceed than help you order stock against a spreadsheet that does not hold up. Start with the margin calculator, then bring your numbers to a strategy review. Channel fees and regulatory costs can be researched per market, and our assortment stage uses the same calculation for each SKU.
Tax treatment and customs duty in this article are examples, not advice. Check them with your accountant and customs broker for each project.