Why Shopify SKU revenue can hide loss-making products

High revenue does not always mean high contribution. One product may attract orders while consuming most of its value in product cost, shipping, refund expense or fixed card fees. The average store margin can conceal the worst items.

Start with an order-level cost stack

For each paid order, begin with receipts less estimated retained taxes and actual refunds. Deduct mapped SKU costs, processing fees and fulfillment. Keep marketing and other period costs as a separate layer, rather than pretending to know the precise advertising cost of each item without campaign-level evidence.

Example of the fixed-fee problem

A $20 order with a 2.9% + $0.30 card charge incurs a $0.88 modeled payment fee, or 4.4% of the sale. The same pricing on a $100 order incurs $3.20, or 3.2%. That difference can matter on inexpensive products with already thin gross margins. These are illustrative rates, not the fee schedule for every store.

Why SKU allocation is approximate

An order might include a $90 jacket and a $10 accessory. If the payment fee is $3.20 and there is no item-level fee data, assigning 90% of that fee to the jacket and 10% to the accessory is a transparent model—but still only an allocation. Refunds, shipping costs, coupons and advertising don't always follow product value. A trustworthy report states its assumptions.

Five checks before changing prices

1. Confirm that every product SKU maps to the current supplier or landed unit cost.
2. Separate product revenue from taxes and customer-paid shipping where possible.
3. Compare returned products by actual refund amounts, not just order statuses.
4. Look at units sold and contribution, not only percentage margin.
5. Model decisions with one assumption change at a time; do not imply a price increase automatically preserves volume.

What to look for in a close pack

A useful SKU table shows units, allocated net revenue, mapped COGS, indirect-cost allocation, estimated contribution and a missing-cost flag. It should reconcile to the period-level economics but never describe allocated figures as exact audited item profits.

AfterCosts is a free, local CSV analysis workspace that supports a reproducible order-level method and an approximate SKU contribution view. The full preview is available for evaluation without connecting your store.

This article is independent educational content, not affiliated with Shopify. Estimates are not accounting or tax advice. Privacy · Terms.