Turnover on Ozon says nothing about your profit. You can sell $500,000 worth of goods in a year and earn zero - I have seen it happen. What you need to calculate is unit economics: cost of goods, commissions, logistics, returns, tax, advertising and what is left after all of it.
That calculation shows which product feeds the store and which one drags it down.
Turnover is misleading
A seller came to me who had sold $500,000 worth of goods in a year. He was not deeply involved in Ozon; a manager ran it and sent nice-looking reports with growth. In reality the numbers in the accounts were very different.
We started calculating. It turned out that after selling $500,000 he had earned nothing, because he was selling at zero profit.
You can generate any turnover you like; with enough effort it is not that hard. What matters is the percentage of net profitability you get. That is why working on profitability and economics is one of the first steps we and our partners take in any store.
How the economics are calculated, with an example
Here are the numbers from my calculation for a smartwatch. We buy the item at $6.40 per unit and list it on Ozon at about $30. We count not "how much came in" but what we subtract:
- cost of goods;
- Ozon commissions;
- logistics;
- returns and cancelled orders;
- tax (a simplified tax regime at 7%);
- packaging and small expenses;
- promotion - I always set aside 10% of turnover.
In that calculation, with turnover of about $193,000, total expenses came to $91,500, leaving $102,700 net. That is the figure to work with, not revenue.
A 12% margin is not low, it is a stage
Someone asked me: why is net profit only 12% on $300,000 of turnover, is that not low?
Look at advertising. Over 3 months we invested $45,000 in advertising and generated $278,000 in sales directly from ads. At the growth stage we use advertising and promotions as a tool to lock in positions in search results. With aggressive promotion we buy ourselves a place in the category top so that later we get more organic sales - simply because the product cards will be at the top even without ads.
This is a working strategy, proven more than once. But it has a price: low profitability during the growth stage.
Where aggressive growth hits a wall
At some point, selling on Ozon, we realised we could not grow further unless we fixed our unit economics.
The logic of aggressive growth is simple: you see potential in a niche, buy advertising, buy out the best positions, pour money into the niche and quickly take the top. Then you consolidate and get sales because you have become big.
The downside is that this approach sharply reduces store profitability. At some stage of scaling you hit the point where the previous pace of increasing advertising no longer delivers matching sales growth. Doubling the budget stops doubling sales.
Then there are two paths: cut the advertising budget or raise spending further to keep the required growth rate. But raising spending puts additional pressure on the store's economics.
We did not want to slow growth. So we started working on unit economics.
What we did
We put forward around 6 hypotheses that would reduce costs without losing quality, speed or sales volume. The goal was to free up money and channel it into scaling. Then we started testing them.
One of them was raising the product price, which also gives an extra boost from Ozon. If the hypothesis works, it alone can add 3-5% to net profit. When every margin percentage point counts, those 3-5 points are already a competitive advantage.
Conclusion: at a certain stage, when you are growing actively, you need to work on unit economics in depth. We never run our stores without analytics - it is basic business hygiene, especially when commissions and taxes press from all sides.
What to do
- Calculate the full cost for each product: purchase, commissions, logistics, returns, tax, packaging, advertising.
- Look at net profit and margin per product, not at the store's total turnover.
- Find products that generate turnover but go negative on margin, and products that actually feed the store.
- Build advertising into the calculation as a share of turnover, not as leftover money.
- If you are growing aggressively and have hit a wall, put forward cost-reduction hypotheses and test them, starting with price.
- Recalculate the economics after every change in price, advertising and terms.
