When selecting products for your e-commerce store, a simple calculation usually takes place: "I buy this shirt for EGP 200, sell it for EGP 600, so I make EGP 400 profit."
This is a dangerous oversimplification.
In e-commerce unit economics, a product's profit margin must account for logistics, marketing costs, and localized return rates (RTO).
Here is how to calculate true unit-level profitability.
The Real Unit Profit Equation
To calculate the true profit generated by a specific product, you must use the following formula: $$\text{Unit Net Profit} = (\text{Price} \times \text{Delivery Rate}) - \text{COGS} - (\text{Outbound Shipping} \times \text{Delivery Rate}) - (\text{Return Shipping} \times \text{RTO Rate}) - \text{CPA}$$
Let's look at a real-world example:
- Price: EGP 600
- COGS: EGP 200
- Meta CPA (Delivered): EGP 150
- Outbound Shipping (Bosta): EGP 55
- Return Shipping (Bosta): EGP 35
- RTO Rate: 25% (Delivery Rate = 75%)
Now, let's plug these numbers into the equation:
- Collected Revenue per Shipped Order: $\text{EGP } 600 \times 75% = \text{EGP } 450$.
- COGS: $\text{EGP } 200$.
- Outbound Shipping Cost: $\text{EGP } 55 \times 75% = \text{EGP } 41.25$.
- Return Shipping Cost: $\text{EGP } 35 \times 25% = \text{EGP } 8.75$.
- CPA: $\text{EGP } 150$.
$$\text{Real Unit Net Profit} = \text{EGP } 450 - \text{EGP } 200 - \text{EGP } 41.25 - \text{EGP } 8.75 - \text{EGP } 150 = \text{EGP } 50$$
So, instead of the EGP 400 gross profit you saw on Shopify, your actual cash contribution is EGP 50 per shipped order. If your CPA increases by just EGP 60, this product becomes a net loss.
Factors That Distort Unit Economics
- Returns Rate spikes: Different product categories have different return rates. Apparel (due to sizing issues) has a much higher RTO rate than home decor.
- Bulkiness: Larger packages drive up Bosta's base delivery rate and return shipping fees.
Automating Product Insights
Analify AI performs these unit economics calculations automatically for every SKU in your store. It pulls delivery statuses from Bosta, ad costs from Meta/TikTok, and displays your actual net margin per product.
Stop selling blind. Connect your store for free and view your net product margins instantly.