E-commerce · 🇺🇸 United States
Margin calculated on an estimate for two years
A brand running ad spend decisions off an estimated cost of goods sold found its actual margin was materially different.
US e-commerce brand, 3 warehouses, 5,600 transactions/month. Client identity withheld — we publish names only with written permission, so this engagement is described by its shape rather than by who it was.
3
Warehouses reconciled
24
Months of COGS restated
9pt
Margin difference on one line
The situation
- The brand held inventory in three locations and had never reconciled physical stock to the ledger.
- Cost of goods sold was booked as a percentage estimate, and ad spend decisions were made against the resulting margin.
What we found
- Inventory in the ledger diverged materially from physical counts across all three locations.
- Landed cost excluded freight and duty, understating cost of goods sold.
- One product line was being scaled on ad spend despite an actual margin nine points below the estimate.
What we did
- Reconciled all three warehouses to the ledger and established a recurring count cycle.
- Moved to landed cost including freight and duty.
- Restated twenty-four months and rebuilt per-SKU margin reporting.
The outcome
- Margin is now calculated per SKU on landed cost, and the brand stopped scaling the line that was unprofitable at real cost.
- That single decision was worth more than the entire cost of the engagement.
What we'd flag
Restated margin was worse across most of the catalogue. The brand had been more profitable on paper than in reality.
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