E-commerce

Inventory-backed direct-to-consumer retail. Unlike SaaS, profit lives in contribution margin after fulfillment, returns, and ad spend — MER/blended ROAS and repeat-purchase rate matter more than any single-channel ROAS. It is the most benchmark-rich model (cart abandonment ~70%, conversion ~1–3%).

Direct-to-consumer e-commerce is a margin game played on top of a logistics operation. Unlike software, every order carries variable costs — fulfillment, shipping, returns, and the cost of goods — so the relevant profit measure is contribution margin, not gross margin. A business can show strong top-line revenue while contribution margin after fulfillment is thin or negative, particularly in categories with high return rates.

Media Efficiency and the Blended View

Acquisition in e-commerce is almost always paid — search, social, direct mail — which makes marketing efficiency ratio and blended ROAS the controlling dials for growth. Single-channel ROAS from Meta or Google is a useful diagnostic, but MER (total revenue divided by total ad spend) is what actually governs profitability, because attribution models consistently miscount cross-channel effects. CAC is the per-customer version of the same question: how much did it cost to land a buyer?

The Repeat Purchase Flywheel

E-commerce economics improve dramatically on the second and third order. Repeat purchase rate determines whether the business is building a durable customer asset or running a perpetual acquisition treadmill. Cohort contribution margin — tracked by the month a customer was first acquired — shows when and whether the payback on CAC turns positive. Average order value and inventory turnover round out the picture: AOV determines how much revenue each session generates, while inventory turns reveal whether working capital is efficiently deployed or locked up in slow-moving SKUs. Cart abandonment hovering around 70% and storefront conversion rates in the 1–3% range are the well-established baselines against which any funnel optimization is measured.