Their best-selling product was also the one losing them money.
Selling more isn't enough if every extra sale leaves you poorer.
Revenue was growing. Cash stayed empty.
Valueize sells online, through its own site and marketplaces like Amazon. The company kept growing month after month, but after three months there was no cash left. The best-selling product was pushed with ever-larger ad budgets, because on the sales dashboard it was the one bringing in the most.
No one had ever added up marketplace fees, cost of goods, ad spend and returns on the same unit sold. The more they sold their top product, the more the company lost, and the decision to keep pushing it was based only on sales volume and gross revenue.
On the left, the revenue everyone saw. On the right, the real margin, after fees, cost of goods, ads and returns. No one had ever done that math.
Gross revenue was the wrong compass.
The criterion used to decide which products to sponsor was sales volume: they pushed whatever sold the most, not whatever earned the most. Estimates lived only in a monthly Excel sheet, incomplete and with no detail per marketplace: no one calculated fees, cost of goods, ad spend and returns product by product. Without that math, the best-selling product looked like the most profitable one too, while it was actually draining cash with every shipment.
Software that calculates the real margin, sale by sale.
The system analyzes every sale in real time and automatically deducts every line that gross revenue hides, for each single product (SKU) and each sales channel.
Applied based on the real fee tables of each sales channel.
Charged directly to every single unit sold.
Allocated exactly to the sale that generated it.
Factored into the product's overall profitability.
The criterion changed: from gross revenue to real margin.
It took just the first week of using the software to discover that 3 products considered winners were operating at a net loss: the related ad campaigns were blocked immediately, and the budget moved only to genuinely profitable products.
3 products uncovered at a net loss in the first week were enough to change the criterion: no longer gross revenue, but real margin, and portfolio margin grew double digit in three months.
Uncovered and removed from the ad push in the first week of using the software.
Overall margin growth in three months, only by reallocating budget to profitable products.
No longer gross revenue: only products that generate real profit get pushed.
“We thought our best-selling product was our main source of profit, when in reality it was losing us money on every shipment. Thanks to the new software we immediately identified 3 loss-making products and moved the ad budget only to what generates real margin. In just three months our net profit grew double digit.”
Managing Director, Valueize
If you push your products by looking at gross revenue, you might be funding the part of your business that's losing money.
How many of your "top products" are actually making you money? The ROIometer puts it in euros.