Hypothetical kitchen gadget. The 6% referral fee is platform-verified (US, most categories); the 20% commission is a convention; other line items are illustrative inputs.
| Line | Worked example | Assumption |
|---|---|---|
| Retail price | $26.00 | listed price |
| Landed cost (product + freight + duties to US warehouse) | $8.60 | illustrative input |
| Fulfillment (pick, pack, ship to buyer) | $5.75 | illustrative input |
| Referral fee | $1.56 | 6% of retail, verified |
| Creator commission | $5.20 | 20% of retail, convention |
| Returns reserve | $2.08 | 8% of retail; refunds are a certainty at scale, only the rate varies |
| Net to you | about $2.81 | roughly an 11% net margin |
One shipping increase, one commission raise, one returns spike, and this unit prints losses. This is why the affiliate lane comes first: learn demand on other people's inventory.
Fees and commissions together reliably eat a quarter to a third of retail, and returns take their bite on top. Screen: retail price needs to run about three times your landed cost plus fulfillment. Worked check: $14.35 of physical cost against $26 retail is under twice; the product fails. It would need to sell near $43, or land near $3, to belong in your shop.
| Product | Retail $ | Landed $ | Fulfill $ | Physical cost (landed + fulfill) $ | Fees + commission + returns $ | Net $ | Net % | 3x screen (retail รท physical) | Pass? |
|---|---|---|---|---|---|---|---|---|---|
| Ex: kitchen gadget | 26.00 | 8.60 | 5.75 | 14.35 | 8.84 | 2.81 | ~11% | 1.8x | NO |
| Lever | Verdict |
|---|---|
| Raise the price | Works if demonstrated value carries it; test upward |
| Cut the landed cost | The healthy lever: order deeper, consolidate freight, switch suppliers. Slow, boring, durable |
| Cut the commission | Trap for affiliate-driven products: coverage evaporates below 10% (15 to 30% is the workable band; above 35% most products fail the screen) |
| Cut the returns reserve | Not a lever. Denial with a spreadsheet attached |
Price band tie-in: the $20 to $100 retail band exists because under $20 the absolute dollars cannot cover the stack, and far above $100 impulse buying fades. Fill this sheet in before you spend a dollar on inventory. The math is the gate.