The cost stack between an apparel brand’s revenue and its true contribution margin is deliberately complex. No single report shows it completely. Getting it mapped clearly at the SKU level takes time — and the picture that emerges is almost always more complex than expected.
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The Full Cost Stack
Production cost, freight and duties, platform fees, customer acquisition spend, return processing, storage. Each sits in a different report. Mapping them to a single SKU-level view takes time — but it's the only way to see clearly which products are contributing and which are consuming capital they haven't earned.
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Returns Destroying Contribution
Apparel averages 25% return rates industry-wide. Each return carries a reverse logistics cost, a restocking cost, and often a write-off. Returns are typically tracked as a blended rate — identifying which specific SKUs are driving the number, and tracing the root cause, is where the real work happens. The Margin Audit identifies the specific SKUs where returns are making the economics unworkable.
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Import Cost Drift
Landed cost calculations done at the time of sourcing rarely reflect current tariff and freight structures. The gap between the cost that was modelled and the cost that is actually being paid compounds with every reorder cycle. Most brands have not reconstructed their landed cost recently — and the number has almost certainly moved against them.
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The Wrong SKUs Getting Capital
Without true per-SKU contribution margin, brands invest in products that look successful by revenue but are destroying margin. The SKU that is third in sales volume may be first in margin destruction. The Margin Audit produces the classification that tells you which SKUs to scale, which to fix, and which to exit.
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Customer Acquisition Cost Invisible
Whether it shows up as platform advertising spend, DTC digital marketing, or wholesale trade show investment — the cost to acquire and retain a customer is rarely mapped to individual SKUs. A product that looks profitable at COGS may be deeply unprofitable once CAC is allocated correctly across the catalog.
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Pricing Architecture Misaligned
Price points set by competitive benchmarking rather than cost structure. Promotional habits that have become structural discounts. The price at which a product sells is rarely the price at which it is profitable once the full cost stack is visible. The Margin Audit identifies the specific SKUs where pricing is working against the economics.