Is your best seller losing money? How to measure product profitability

Ask a D2C team which product matters most and they will name the best seller. Ask which product makes the most money and the room usually goes quiet. Those are often different products, and the gap between them is one of the most useful things a brand can find.

Why revenue rankings mislead

A product’s revenue says nothing about the costs that come with it:

• Discounts. Hero products are usually the ones on promotion.
• Weight and size. A heavy product can cost twice as much to ship as a light one at the same price.
• Returns and RTO. Some products are returned or refused far more often than others.
• Payment mix. Products sold mostly on cash on delivery carry more RTO and slower cash.

Add those up and a product with 30% of revenue can carry 15% of contribution, while a quiet product with 10% of revenue carries 18%.

Build a product P&L

For each product, over a period long enough to be stable, usually 28 or 90 days:

1. Net sales: revenue after discounts and refunds, excluding tax.
2. Product cost: units × cost per unit.
3. Share of order-level costs: shipping, packaging, payment fees and RTO, shared across the products in each order by each line’s share of the order’s value.
4. Contribution = net sales − product cost − its share of order costs.
5. Contribution per unit, to compare products sold at different volumes.

Sharing order costs by value is not perfect, but it is fair and consistent. A ₹1,500 line in a ₹2,000 order carries three quarters of that order’s shipping and fees.

Compare revenue share with profit share

Put every product’s share of revenue next to its share of contribution:

The gaps are the decisions:

• Revenue share well above profit share: check the discount depth, the price, the pack size and the return rate. Consider a price rise or a bundle that lifts order value.
• Profit share well above revenue share: under-promoted. Give it ad budget, feature it, test it as the acquisition product.
• Negative contribution with meaningful volume: every order loses money. Fix it or stop pushing it.

Look at what sells together

The pairs that appear in the same order most often are your natural bundles. A bundle of two complementary products at a modest discount often lifts order value and margin at once, because shipping and fees are paid once for both.

Measure attach rate, the share of orders with product A that also include product B, before and after.

Look at what brings customers back

The product a customer buys first shapes whether they come back. For each first product, measure the share of customers who placed a second order within 90 days. A product with a high second-order rate is worth more than its first-order contribution suggests, and may be the right one to lead acquisition with.

Re-run it after every promotion

Promotions change the picture fastest. A sitewide 20% sale moves contribution between products in ways the revenue report never shows. Re-run the product P&L for the sale period and compare it with a normal month before planning the next one. The discount break-even calculator shows how much extra volume a discount needs just to stand still.

Do it with Gran

The margin and markup calculator checks a single product’s price, free. Gran Products builds the product P&L every day from Shopify: contribution per product after cost, discounts and its share of shipping, fees and RTO, revenue share against profit share, products that lose money flagged on Home, and what sells together.