Variable Costs
Costs that go up when you sell more. Products, shipping, payment fees, packaging — every unit you ship has these attached. You can't avoid them, but you can shop for better rates on shipping and negotiate with suppliers.
Example
Each unit you sell has $15 in product cost, $3 for shipping, and about $1.46 in payment fees. That's $19.46 in variable costs per unit — money that walks out the door with every order
Why It Matters
Variable costs scale with every order you process — product costs, payment fees, shipping, packaging. They're the reason doubling revenue doesn't double profit. Merchants who don't track variable costs per unit are flying blind on pricing decisions.
Pro Tip
List every variable cost per order. If the total exceeds 70% of your AOV, your pricing or product sourcing needs to change.
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