E-Commerce Profitability Analysis

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KPIs

Project overview

Gross revenue looked healthy, over $1M across two years, but nobody had verified where the actual profit was coming from. This project rebuilds profitability from the transaction level up: real fees, real returns, real shipping costs, mapped back to every category, channel, and marketing platform.

• Orders (2,000 rows): order-level transactions: revenue, discounts, shipping, product cost, platform/transaction fees, returns, channel, category, date.
• Products (207 rows): SKU-level catalog with unit cost, selling price, and category-level shipping cost/unit.
• Marketing Spend (144 rows): monthly spend, impressions, clicks, conversions, and attributed revenue by advertising platform, over two years.

Methodology

Findings

• First thing I checked: was margin actually shrinking? It wasn't. Year-over-year margin came out essentially flat (20.08% in 2024 vs. 20.32% in 2025) once I excluded a couple of months with unreliably low order volume.
• So the real story turned out to be concentration, not decline. Electronics (31.1% margin) and Mobile App ($36.32 avg profit/order) are carrying the business, while Books (11.9% margin) and Marketplace ($15.40 avg profit/order) are barely breaking even.
• Once I broke out the cost components, shipping, not product cost or discounting, was driving category margin. Product cost stays flat (~38–42%) across every category, but shipping ranges from 13.5% of revenue (Electronics) up to 27.9% (Books), tracking the margin ranking almost exactly: Electronics 31.13%, Toys 26.15%, Home & Kitchen 25.37%, Food & Beverage 24.76%, Sports 23.50%, Clothing 19.99%, Beauty 17.39%, Books 11.94%.
• Same story on channels: it's platform fees, not order size, driving the gap. Average order value barely moves across channels (~$134–$140), but Marketplace pays ~$19/order in fees and keeps only 13% margin, while the owned channels (Website, Mobile App) pay $0 in fees and keep 27–30%. Avg. profit per order: Mobile App $36.32, Website $31.60, Social Commerce $17.11, Marketplace $15.40.
• Marketing was efficient overall, just uneven. TikTok (24.0x) and Influencer (22.7x) were the strongest performers; Email Marketing (4.8x) was the weakest and the only platform to post a losing month (Dec 2025).

Recommendations

My call: cut Email Marketing entirely ($24,461) and trim Facebook Ads by 71.6% ($76,240), a combined $100,701 cut that hits the full 20% budget-reduction target while costing only 12.16% of total attributed revenue ($990,411 of $8.15M), a smaller hit than the size of the cut itself. I also modeled two gentler, more diversified alternatives for anyone who'd rather trade some efficiency for lower implementation risk.

What this demonstrates

• Turning messy transactional data into a validated, trustworthy financial model.
• DAX and data modeling applied to a genuinely ambiguous business question.
• Translating analysis into a specific, defensible budget recommendation, not just a chart.