Calculating gross margin by simply subtracting product cost from retail price gives a dangerously misleading picture of brand health in India. Between payment gateway transaction cuts, logistics weight surcharges, and return processing fees, unmapped operational leakage eats away baseline profitability.
Accounting for Logistics Surcharges
Base shipping rates advertised by courier aggregators rarely reflect final costs after volumetric weight adjustments and fuel surcharges are applied. Factor in reverse logistics overhead and restocking labor for returned goods to establish an accurate cost per delivered package.
Gateway Fees and Cash Handling Mechanics
Payment gateways charge between one and two percent per transaction, while Cash on Delivery handling fees add flat charges per shipment. Aggregating these fees across monthly volume reveals how small transactional percentages erode operating margin over time.
Setting Sustainable Free Shipping Thresholds
Offering free shipping on low cart values forces your business to absorb fixed transit costs that destroy unit margins. Structuring free delivery thresholds twenty percent above your average order value protects profitability while encouraging customers to add extra items.