Which of Your Products Actually Make Money? A Guide to SKU Profitability

Most D2C brands know their overall margin. Far fewer know which individual products make money and which ones quietly lose it. A product-level (SKU) P&L often changes what founders decide to promote, reprice, or discontinue.

A worked example

Numbers in this example are illustrative.

A brand sells three products. Here’s what each one earns per unit after all variable costs, including the marketing spent to sell it:

Product C loses ₹30 on every unit sold. If it’s heavily promoted because it’s the “entry-level” product, the brand may be spending money to lose money.

What else to check for each product

• Return and RTO rate: some products come back far more often.
• Inventory days: slow movers lock up cash.
• Repeat purchase: a low-margin product can still be worth it if buyers come back for higher-margin ones.
• Channel mix: a product may be profitable on your website but not on marketplaces.

What to do with loss-making products

1. Reprice if customers value it more than you charge.
2. Bundle it with a higher-margin product.
3. Cut its cost through sourcing or packaging changes.
4. Stop advertising it on its own, and let it sell organically.
5. Discontinue it if none of the above works and it doesn’t drive repeat purchases.

Allocating marketing fairly

Marketing is the hardest cost to assign to products. Use campaign-level data where possible, and a simple revenue-share split where not. The allocation doesn’t have to be perfect, just consistent from month to month.

FAQs

How many products should I analyse?

Start with the products that make up most of your revenue. Many brands find a handful of SKUs drive the majority of sales.

Should I cut every product with negative contribution?

Not automatically. Check whether it brings in customers who go on to buy profitable products.

How often should I review product profitability?

Quarterly at minimum, and before any major pricing or marketing change.