What is SKU-level P&L?

What it is

A normal profit and loss account shows the business as a whole. A SKU-level P&L shows the same figures per product, down to contribution margin. It answers the question a total P&L cannot: which products make money and which ones the others are carrying.

What goes into each SKU

Charge each SKU with the costs it actually causes:

• Net revenue: sales after GST, discounts, cancellations, returns and RTOs.
• Landed cost of the units sold, including stock written off on damaged returns.
• Channel fees from the settlement reports: commission, closing or fixed fee, shipping or weight-handling fee and payment charges.
• Returns and RTO costs: return shipping and the forward shipping on orders that never earned revenue.
• Storage in fulfilment centres, which is often billed by volume and time.
• Ads: campaigns are usually set up by SKU or product group on marketplaces, so this spend can be charged directly.

Stop at CM3. Fixed costs such as salaries, rent and software do not change if one SKU is dropped, so spreading them across SKUs makes every product look worse without helping any decision.

Where the data comes from

Most of the work is joining reports:

1. The order report gives units, prices and SKUs.
2. The settlement report gives every fee and deduction by order, which can be mapped to SKUs.
3. The returns and RTO reports show which orders came back.
4. The ad console gives spend by campaign, mapped to SKUs.
5. Landed cost per unit comes from purchase records.

Build it monthly, for each channel, because the same SKU can earn well on your website and lose money on a marketplace.

What to do with it

• Reprice SKUs where CM2 is thin.
• Repack bulky SKUs to bring down shipping slabs and storage.
• Cut or redirect ads on SKUs with negative CM3.
• Bundle low-value SKUs instead of selling them alone.
• Delist SKUs that stay negative after these changes and do not bring in customers who buy other products.