How do you analyze product profitability?

There aren't any tools as such to analyze your product's profitability. You can evaluate product profit metrics like MCU (contribution margin per unit) to understand if a product is a good fit for you. Fortunately, manually analyzing your product profitability is a fairly piece of cake.

Here's how to calculate the profitability of a product in e-commerce:

• Find out the product's total revenue.
• Add up all the direct and indirect expenditures.
• Subtract the total spending from products' total revenue.

Mathematically, it can be written as:

Total product revenue - Total direct and indirect costs

Product profitability is analyzing if a product brings in profit after deducting all the costs that were used to produce, market, and distribute it. Here's how you can analyze product profitability:

Determine all your direct and indirect costs then subtract them from the product's revenue.