🟣 Why Contribution Margin Could Be Your Key to Surviving the Squeeze

Table of Contents

• On the Pod

• Why Contribution Margin is Your New Best Friend

• The Ripple Effect of the UK Rental Squeeze on eCom …

• How Princess Polly Became a $100M+ Fashion Powerho …

• 🛑 FTC’s New Rule Takes Aim at Fake Reviews

• Other headlines

• Why VO2 Max Should Be on Your Radar

• Don’t Fight Gravity

On the Pod

Lastest episodes:

• Cutout 1: Leveraging AI for Creative Direction in Meta Ads → Depesh Mandalia

• August Update → Kunle Campbell

• How to Effectively Leverage Etsy as an eCommerce Sales Channel → Dylan Jahraus

• Digital Products → How Ryan Sold a Million Stars

• How AI and Entity-Based Search are Transforming SEO → Zach Boyette

COMMERCE TIPS

Why Contribution Margin is Your New Best Friend

It’s getting harder out there. Inflation is gnawing at your profits, and consumers are spending less on non-essentials. So how can you keep your eCommerce business afloat? Two words: Contribution Margin.

Breaking it Down:
Contribution margin is the hero you didn’t know you needed. It tells you how much profit is left after subtracting variable costs (think materials, shipping, and marketing) from your sales revenue. This metric is the key to understanding which products are pulling their weight and which ones are dead weight. In simple terms, it’s the money that actually contributes to covering your fixed costs and making a profit. Want to dive deeper? Check out this guide on understanding and calculating contribution margin​ (BizFinance).

Why Now?
Here’s the thing—when inflation is high and discretionary spending is low, every dollar counts more than ever. Margins are being squeezed from all sides, and consumers are thinking twice before clicking “add to cart.” You need to know, with absolute clarity, which of your products are truly profitable. By focusing on contribution margin, you can make smarter decisions about pricing, promotions, and where to cut costs without hurting your business. Explore how inflation and consumer spending are impacting your margins and what to do about it​ (UPP).

Strategic Moves:
So, what do you do with this information? For starters, optimize your pricing strategy. If a product has a high contribution margin, maybe you can afford to run a discount or offer free shipping to boost sales without hurting your bottom line. On the flip side, if a product’s margin is razor-thin, it might be time to reassess its place in your lineup. Plus, this metric helps you zero in on where to allocate your marketing dollars for the biggest bang for your buck. Get practical tips on improving your contribution margin in this in-depth article​ (Clearco Funding).

The Bottom Line:
In today’s challenging economic environment, understanding and improving your contribution margin isn’t just a good idea—it’s a necessity. It’s the best way to ensure that every product you sell is contributing positively to your bottom line, giving you the insight you need to navigate through the stormy waters of inflation and reduced consumer spending. Ready to make changes? Learn how other businesses are optimizing their contribution margins here​ (HKTDC Sourcing).

COMMERCE TRENDS

The Ripple Effect of the UK Rental Squeeze on eCommerce

UK consumers are in for a rough ride. Rental affordability has hit its worst level in over seven years, with tenants now spending almost 30% of their income on housing according to ONS data. As if that wasn’t enough, October 2024 will see a 9% rise in energy prices, further tightening household budgets. With food prices also on the rise, it’s clear that consumers will have less discretionary income to spend on non-essentials.

What This Means for eCommerce

As wallets shrink, consumers are expected to become even more selective with their purchases. eCommerce businesses need to adapt to this shift by focusing on value-driven strategies. Here’s how you can stay competitive:

1. Focus on Essentials
With consumers prioritising necessities, it’s crucial to highlight essential products and offer value-driven bundles or discounts to attract budget-conscious buyers. Learn how to optimize your product mix to stay ahead.

2. Boost Loyalty Programs
In challenging times, loyal customers are your best bet. Offering tailored rewards and discounts can keep them coming back, even as they cut back on spending elsewhere.

3. Prioritise Profitable Products
Streamline your inventory to focus on high-margin items that provide the most value to your bottom line. Discover how to identify your most profitable products to maintain profitability.

Bottom Line

As UK households brace for rising rents, energy costs, and food prices, eCommerce operators need to pivot quickly. By focusing on essentials, rewarding loyal customers, and zeroing in on profitable products, you can navigate these tough times and keep your business thriving.

$100M+ BRAND STORIES

How Princess Polly Became a $100M+ Fashion Powerhouse

Australian fashion brand Princess Polly has skyrocketed to over $100 million in revenue by mastering social media and influencer marketing. With a focus on platforms like TikTok and Instagram, they’ve turned everyday fashion into a viral sensation. Here’s how they did it:

1. Leverage Influencers: Princess Polly collaborates with micro and macro influencers to create authentic content that resonates with their target audience—young women. These partnerships drive massive engagement and brand loyalty, resulting in millions of impressions and significant revenue boosts .

2. Optimize with Data: They use rapid feedback from social media to fine-tune their product offerings, minimizing the risk of launching unpopular lines. Their aggressive search and social ad strategies ensure they remain top-of-mind for their audience, driving consistent traffic to their site .

3. Engage with Tech: Princess Polly’s app has become a revenue powerhouse, boasting a 414.3x return on app spend. By integrating features like AR Try-On and personalized shopping experiences, they’ve increased customer retention and average order values, proving that a seamless mobile experience is key to ecommerce success .

Want to replicate their success? Focus on building strong influencer relationships, leveraging data-driven decisions, and investing in mobile technology to create a frictionless shopping experience.

🛑 FTC’s New Rule Takes Aim at Fake Reviews

In a move that’s shaking up the DTC and e-commerce world, the FTC has just unveiled a new rule targeting fake reviews and deceptive testimonials. Dubbed the “Final Rule,” this latest regulation is designed to crack down on companies that fabricate or manipulate reviews to sway consumer decisions—especially relevant for platforms like Amazon where reviews can make or break a product.

Here’s the lowdown:

No More Fakes: The rule outright bans the creation, buying, or selling of fake reviews. Yes, that includes those shady AI-generated ones that sometimes sneak into Amazon product pages.

Transparency is Key: Companies are also forbidden from suppressing negative reviews or falsely claiming that their review sites are independent. So, if you’ve ever doubted that glowing 5-star review on Amazon, the FTC’s got your back.

The Penalty: Break the rule, and you could be looking at fines as steep as $51,744 per violation.

This move is part of a broader initiative by the FTC to ensure honesty in online advertising and protect consumers from misleading practices. In short, if your brand wasn’t already focused on authentic reviews, now’s the time to start—especially on platforms like Amazon, where consumer trust is everything.

For businesses playing by the rules, it’s a win. For those who aren’t… well, let’s just say the FTC means business.

Other headlines

• The Google Antitrust Trial: What Marketers Need to Know

• Temu’s growing investment in Meta and decline in YouTube spend

• Temu overtook eBay to become the 2nd most-visited e-commerce website in the world

HEALTH IS WEALTH

Why VO2 Max Should Be on Your Radar

VO2 Max isn’t just a fitness buzzword; it’s a powerful indicator of how long and how well you might live. This metric measures how effectively your body uses oxygen during exercise, and higher scores are linked to lower risks of heart disease, diabetes, and even early death​ .

Why It Matters
Simply put, a higher VO2 Max means your heart and lungs are in better shape. Studies show that people with higher VO2 Max levels tend to live longer, healthier lives. It’s like a crystal ball for your cardiovascular health​.

How to Measure It

• Wearables: Devices like the Garmin Forerunner and Fenix series offer relatively accurate VO2 Max estimates, especially when paired with a chest strap for more precise heart rate monitoring.

• Advanced Wearables: The WHOOP strap, when combined with PNOE’s cardio-metabolic analyzer, provides one of the most accurate consumer-level VO2 Max measurements available​.

• Lab Test: For the most accurate results, consider getting a VO2 Max test at a local performance studio or sports lab. These tests use specialised equipment to provide precise measurements, giving you a clear picture of your cardiovascular fitness​.

If you’re not tracking it, now’s the time to start. Your future self will thank you.

MINDSET OF WINNERS

Don’t Fight Gravity

In life, not every obstacle is a problem to be solved; some are simply unchangeable circumstances. As Dave Evans and Bill Burnett remind us in Designing Your Life: "If it's not actionable, it's not a problem, it's a circumstance."

When you're pushing hard but getting nowhere, it's crucial to ask yourself: Are you up against a barrier that can be overcome, or are you fighting gravity? Knowing the difference can save you from unnecessary struggle and help you focus on what you can truly change.