Why Your Margins Are Typically Off by 30-40% From Reality

"Buy at 120k, sell at 350k, margin 66%. Good product."

This is the margin calculation most shop owners use. It is not wrong mathematically. But it is calculating theoretical gross margin, not actual net margin.

The gap between those two numbers is typically 25-40 percentage points.

The problem is not the formula. It is what you put into it.

The formula (selling price - COGS) / selling price is perfectly correct. The problem is that most shop owners define COGS = purchase price on 1688, while actual COGS is the sum of many other costs.

Actual COGS (also known as landed cost) includes:

• Purchase price (converted CNY to VND at the real exchange rate, not the bank rate)
• Domestic China shipping + consolidation warehouse fees
• International shipping (divided by the number of units in the shipment)
• Import duties (if going through formal customs)

And then, to get net margin, you still have to subtract:

• Platform fees (Shopee, TikTok Shop, Lazada, each different, plus promotional surcharges)
• Payment processing fees (~1-1.5%)
• Return costs (return rate x handling cost per returned order)
• Packaging costs

A concrete example

Product A:

• Purchase price: 35 CNY (~123,000 VND at real exchange rate)
• Shopee selling price: 350,000 VND

Margin using the common calculation: (350k - 123k) / 350k = 65%

Actual margin:

| Line item | VND | |-----------|-----| | Purchase price (CNY converted) | 123,000 | | China logistics + consolidation | 9,000 | | International shipping (per unit) | 22,000 | | Shopee platform fee 6.5% | 22,750 | | Payment processing 1.5% | 5,250 | | Returns 5% (~17,500/order) | 17,500 | | Packaging | 1,500 | | Total cost | 201,000 | | Net profit | 149,000 | | Net margin | ~43% |

From 65% down to 43%. This product may still be worth selling, but the financial picture is completely different.

When the discrepancy becomes dangerous

This gap turns into a serious problem when you:

1. Price based on the wrong margin: If you think your margin is 65% and run a 20% discount, you calculate that you still have 45% margin. In reality, you are selling at breakeven or a slight loss.

2. Scale decisions based on the wrong margin: "Products with 60%+ margin, order more." But that 60% does not reflect reality, so the scaling decision is based on bad data.

3. Compare products against each other: You may wrongly prioritize Product A (high gross margin) over Product B (lower gross margin but fewer returns, lower platform fees, and cheaper logistics).

Why most people do not calculate correctly

Not because they are lazy. Because the full calculation is hard to do in Excel:

• Exchange rates change daily and require manual updates
• International shipping costs vary by shipment and need to be allocated per SKU
• Platform fees differ by category, account tier, and promotional programs
• Return rates need to come from actual historical data for each product

Doing it correctly for one product takes about 10-15 minutes. When you are evaluating 50 products per week, nobody has time for that.

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This is the problem we are solving in Ordinex: automated landed cost and net margin calculations, built directly into the product screening workflow. If you want to try it when this feature launches, sign up here or contact thinh@ordinex.io.