How a discount eats your margin
A discount comes off the price. None of your costs go down with it. The product costs you the same, and the carrier charges the same. So every dollar of discount comes out of your profit.
Take a sample product that sells for $80 excluding VAT. It costs you $30 to buy and $7 to ship. The payment fee is 2.9% plus $0.30. At full price, one order leaves you $40.38. At 25% off, it leaves $20.96.
| Sample numbers | Full price | 25% off |
|---|---|---|
| Price, excluding VAT | $80.00 | $60.00 |
| Product cost | −$30.00 | −$30.00 |
| Shipping you pay | −$7.00 | −$7.00 |
| Payment fee, 2.9% + $0.30 | −$2.62 | −$2.04 |
| Profit per order | $40.38 | $20.96 |
The price fell by a quarter. The profit per order fell by almost half. The thinner your margin, the wider that gap gets. If your costs take 70% of the price, a 30% discount leaves you nothing at all.
Not sure what one order leaves you today? Our guide to profit per order in WooCommerce walks through it.
Extra sales must outgrow the discount
A sale will bring more orders. That part is rarely in doubt. The real question is whether the extra orders make up for the smaller profit on each one.
In the example, a sale order keeps about half of a normal order. So you need about twice the orders to stand still. Most stores also spend more on ads during the sale. That pushes the number of orders you need even higher.
Sale profit = (orders per day × profit per sale order − ad spend per day) × daysDo the same sum for normal days at full price, and compare.
Here is the sample store again. On a normal day it gets 20 orders and spends $150 on ads. Four normal days keep $2,630.40. The sale brings 45 orders a day, with $400 a day in ads. Four sale days keep $2,172.80.
That’s more than twice the orders and $457.60 less money. To find how many orders the sale needs to match a normal period, use this:
Orders needed = (normal-period profit + sale ad spend) ÷ profit per sale orderExample: ($2,630.40 + $1,600) ÷ $20.96 = 201.8, so 202 orders over four days
That’s 122 more orders than four normal days bring in. If you doubt you can reach it, a smaller discount may earn more. In this example, 21% off still beats a normal four days. At 22% off, it falls behind.
Try your own numbers below. Use prices and costs excluding VAT. Nothing you type leaves this page.