Multi-Product Profit Calculator

How it is calculated

Total profit across a catalogue is the sum of each product's contribution times its volume, less shared fixed costs. Written out: Σ(unit contribution × units) − fixed costs.

The reason to calculate it product by product rather than in aggregate is that the aggregate hides which products are carrying the business and which are being carried. A single blended figure cannot answer any range decision.

Numbers on it

Product A: 400 units, $8.20 contribution, $3,280. B: 150 units, $26 contribution, $3,900. C: 900 units, $2.10 contribution, $1,890. Total contribution $9,070 against $7,000 of fixed costs, so $2,070 of profit.

C produces 60% of the units and 21% of the contribution. It also produces 60% of the picking, packing, support and returns. If handling costs $1.40 per order beyond what is already in the contribution figure, C is contributing $0.70 a unit rather than $2.10, and its share of the profit falls to under 8%.

Dropping C entirely loses $1,890 of contribution and saves 900 orders of handling. Whether that is a good trade depends on whether C brings customers who also buy A and B, which is a measurable question, not a rhetorical one.

What it does not tell you

Shared fixed costs cannot be allocated meaningfully to individual products, so a product-level profit figure that includes an allocation is an artefact of the allocation method. Contribution is the honest product-level number; profit exists only at the level where the fixed costs sit.

Cross-selling effects are also invisible in the arithmetic. A low-contribution product that reliably brings customers who buy high-contribution ones is earning its place through a route the table does not show.

What follows from it

Rank by contribution and by contribution per order, and look at where the two rankings disagree. The products that fall sharply between them are the ones consuming operational capacity out of proportion to what they produce.

Before dropping anything, check the baskets. Pull the orders containing the candidate product and see what else is in them. If it appears mostly alone, the contribution figure is the whole story; if it appears alongside better products, it may be doing work the table cannot see.

Handling the long tail

Most catalogues follow the familiar shape: a small number of products produce most of the contribution and a long tail produces most of the SKU count. The tail is not automatically a problem. It can support search visibility, range credibility and basket building, but it is almost always larger than it needs to be.

The useful cut is not by contribution alone but by contribution against the cost of existing. Each SKU carries photography, listing maintenance, storage, and a share of the stock investment. A product contributing $400 a year against $260 of carrying cost is barely worth the space; one contributing $80 is not.

Reviewing the tail annually against that threshold, rather than never, typically removes fifteen to twenty percent of SKUs and almost no contribution, and releases both the capital and the attention that were sitting in them.