The Pricing Strategy that Could Save or Sink Your eCommerce Brand
- Jason Chappel
- Nov 7
- 10 min read
If your eCommerce store isn’t as profitable as it should be, your pricing might be the problem.
In this episode of Clicked Off, you’ll discover how to build a profitable pricing model for your eCommerce business using two proven approaches; top-down pricing and bottom-up pricing.
These methods help you move beyond guesswork and create a pricing system that supports real, sustainable profit rather than chasing vanity metrics like revenue growth or conversion rate.
You’ll learn how to set eCommerce product prices strategically, avoid hidden costs, and protect your margins across every sales channel. This episode walks you through how to calculate true profitability before you launch, discount, or scale.
We also explore how pricing impacts the entire customer journey, from customer acquisition cost (CAC) and fulfilment expenses to retention rate and lifetime value (CLV).
You’ll understand why so many brands look profitable on paper but still struggle with cash flow, and how to correct it with a data-driven pricing framework.
By the end, you’ll know exactly how to price your products for profit, not just for sales volume and how to align your pricing with your growth goals to build a more scalable, financially healthy eCommerce brand.
Key Takeaway
When you understand how pricing connects to every part of your business, from acquisition to retention, you stop chasing sales and start building profit.
Get your pricing right, and everything else in your business gets easier.
Who this episode is for
This episode is essential listening if you’ve ever caught yourself wondering:
“Why does it feel like I’m selling more but making less?”
“How do I know if my prices are actually profitable?”
“What’s the right way to factor in costs like marketing, fulfilment, and time?”
If you’ve ever raised or lowered prices and felt unsure if it was the right move, this episode will help you take the guesswork out of pricing for good.
What you’ll learn in this episode
The real difference between gross profit and net profit, and why many brands confuse the two.
Why a 60–70% gross margin doesn’t guarantee you’re making money once you include fulfilment, tax, and time.
How to use top-down pricing to work backwards from your desired profit and build a price that actually supports it.
How to use bottom-up pricing to start from your costs and find the minimum viable price that keeps your business sustainable.
How to calculate your breakeven point, including marketing and operational expenses.
The most common pricing mistakes that silently kill profit and how to fix them before they spiral.
How to align your pricing with customer perception so you don’t lose trust when increasing prices.
The step-by-step method for setting profitable prices without copying competitors or hoping for the best.
By the end of this episode, you’ll have a clear framework to confidently price every product in your store for profit, not just sales volume.
Resources mentioned in this episode
Join my Skool community: eCommerce Growth Made Easy for community with other eCommerce founders, tools, calculators & training.
Follow Jason Chappel on LinkedIn.
Transcript
Welcome to Clicked Off the podcast for eCommerce merchants who want growth without the guesswork.
I’m Jason Chappel, founder of Defiant and creator of eCommerce Growth Made Easy. I have helped countless eCommerce brands grow their brands, working with businesses all the way from $0 to over $50M.
Each week, I’ll break down what’s working, what’s not, and how you can grow smarter without the fluff.
If you’re an eCommerce founder, this episode is one you can’t afford to skip quite literally.
Now, it’s been two years since I last recorded Clicked Off.
In that time, I’ve had so many conversations with founders, marketers, and operators across the eCommerce space and here’s what I kept hearing:
“We don’t just want inspiration. We need practical, step-by-step advice we can actually use.”
And I hear you.
The interviews we did were great, but what you really want is help applying these concepts to your own store.
So that’s where we’re going to take the podcast: actionable step-by-step guidance on pricing, forecasting, customer lifetime value, budgeting, and all the fundamentals that will help you grow without guesswork.
And what better place to start than with one of the biggest levers in your business: pricing.
Now before you roll your eyes and think, “I already know my prices…” let me stop you right there.
Because most brands I meet from first-time founders to eight-figure businesses are getting their pricing wrong.
They either don’t know what it really costs them to make and sell a product, or they’re copying competitors without knowing whether that price works for their business.
So in this episode, I’m going to walk you step by step through two powerful ways to set your prices the right way top-down and bottom-up so you can stop guessing and start aligning your pricing with your business goals.
By the end, you’ll know exactly what you need to do to figure out whether your pricing makes sense and what to do if it doesn’t.
But, before we get into the models, let’s clear up one important thing, the difference between gross and net profit:
Gross profit is what you make before you pay for marketing, salaries, software, or anything else that keeps the lights on.
It’s simply:
Revenue MINUS cost of goods sold = gross profit
Net profit is what you actually take home after all your costs are accounted for think:
Ads, Agencies, Staff, Platform fees, Packaging, Subscriptions, Shipping. The list goes on…
It’s basically: Revenue MINUS everything else
Now, you might be asking, why does this matter?
And the answer is: Because a product might look like it’s making money on paper but when you factor in what it cost you to acquire that customer and keep the business running, you could be losing money without realising.
And that’s why getting your pricing right is so important.
Let’s start by breaking the biggest pricing myth out there:
“If you’ve got decent gross margins, you must be making money.”
It sounds reasonable. But it's wrong.
Gross margin that’s the amount left over after you subtract the cost of your product doesn’t tell the full story.
You might have a 70% gross margin, but if you’re not accounting for marketing spend, fulfilment, payment processing, packaging, staff, and platforms… you could still be running at a loss.
So if you’re using gross margin as your only metric for pricing you’re flying blind.
Let’s start by looking at how we build out our pricing from the top-down.
This approach is useful if you’ve already got a target sale price in mind maybe based on competitors, market expectations, or what you think your customer is willing to pay.
Here’s how it works:
Start with your retail price.
Let’s say you want to sell your product for $50.
Then, subtract your cost of goods (COGS). This is the price you pay for the product.
This includes everything it takes to make the product: raw materials, manufacturing, packaging even your time.
If it takes you 10 minutes to make the product and you want to pay yourself $60 per hour, that’s $10 of labour. If you import your product or source it from a supplier these costs need to be the landed cost. So if you pay for it to be shipped from the manufacturer to you, include this in your COGS.
Next, subtract your variable costs.
These are the costs that come only when you make a sale.
Think: Payment processing fees, Shipping and fulfilment, Pick and pack (either your time, or a 3PL), Loose fill, labels, tape all those “little” costs that add up.
Then look at your fixed costs, operational expenses or OPEX.
These are things like:
Platform fees such as Shopify, Klaviyo, or any other technology you use to run your store, Staff wages, Insurance, Rent, subscriptions, and agency fees
You won’t apply these per product, but you do need to know how many units you’ll need to sell to cover them.
Now calculate your breakeven point.
How many units do you need to sell at $50 to cover all those costs and still turn a profit? Remember, you will need to cover all of your open or fixed costs with what’s left AFTER you’ve deducted, your COGS AND your variable fees.
If the answer feels unrealistic like you’d need to sell thousands of units just to break even then your pricing needs a rethink.
Now let’s flip it.
Bottom-up pricing starts from your costs, not your target price.
This method is great if you don’t have a specific sale price in mind yet or if you want to double-check whether your pricing is viable based on your business model.
Here’s how you do it:
Start with your COGS again.
Remember to Include everything materials, manufacturing, labour.
And don’t underestimate your time.
Add your variable costs.
Again, these get added to every sale you make. These are:
Transaction fees, Shipping, Fulfilment labour, and Consumables like packaging.
Now add your fixed monthly costs or your OPEX.
Things like:
Rent, Salaries, Subscriptions, Insurance, and platform fees.
So what might that look like?
Let’s say your fixed monthly costs are $5,000 and you expect to sell 1,000 units.
That adds $5 of OPEX per unit.
Remember, if you don’t sell 1,000 units, your OPEX per product will go up, and if you sell more than 1,000 units, your OPEX per unit will come down. In the first instance you’ll be eating into your profit, and in the second, you’ll be making more money than you anticipated.
The next thing to do is to Decide how much net profit you would like to make per unit.
So, If for example your COGS are $10 per unit, your variable fees are $5 per unit, and your OPEX is $5 per unit, you have a total unit cost of $20. Add some leeway in here too for any unforeseen or ad hoc costs that arise or administrative costs like stationery that you’ll need, or the odd team lunch. So for me I would round this to $25 to make sure I’ve covered everything.
There is now only 1 thing missing, and we’ll cover that in a minute.
But, the beauty of this approach means that you now get to decide how much profit you want to make. Whereas if you price top down, net profit will be whatever you’re left with.
So I now know that my product and business expenses are coming out at around $25 per unit as long as I sell the number of units I predicted. So everything else from here on out is profit. You can go as wild as you like, and let’s be honest, you want to make as much per unit as humanly possible, so let go of any ideas around what is fair or reasonable, charge what it is worth!
The bigger this discrepancy between your costs and the retail price, the more leeway you have if you aren’t quite hitting your sales volumes, so think long and hard about where you set your price.
Once you’ve got this you will have a price built out for you product that makes sure that you’re not only covering your costs, but means that you’ve prioritised profit. This also gives you some breathing room if some costs go up, or customer acquisition costs rise, you might lose some profit, but you won’t go into the red.
I see too many brands skip this work.
They launch with a price they think feels “about right,” only to realise months later that they’re working hard… and still not profitable.
That’s when the panic sets in:
They try to lower costs.
They try to raise prices after customers are used to cheaper ones.
Or worse they discount heavily just to move volume, not realising they’re making the problem worse.
Here are a few red flags I see all the time:
1. You’re using competitor pricing as your benchmark.
But you have no idea what their cost base looks like.
2. You’re chasing volume instead of margin.
But without margin, more sales just means more work… and no reward.
3. You’re not paying yourself.
If your pricing doesn’t include a fair rate for your time, you don’t have a business you’ve got an unpaid job.
4. You’re banking on retention to fix poor first-order economics.
But if customers don’t come back… you’ve lost money on every sale.
I mentioned it briefly earlier, but the one thing you definitely don’t want to forget when looking at you r pricing, is marketing!
This is where a lot of brands go wrong even if they do a decent job on pricing.
They calculate their gross margin, feel good about the number… and then forget about one of the biggest costs in eCommerce:
Marketing.
If you're paying $15 to acquire a customer through ads and you're only making $20 gross profit you’re not left with much after rent, tools, support, and fees.
And if you’re discounting on top of that? You’re burning profit.
So don’t stop at gross margin. Once you’ve worked out your base costs and ideal price, ask:
How much will it cost to acquire a customer?
Will I be first order profitable?
And if not, How many repeat purchases do I need to make a profit?
This is what separates the businesses that grow from the ones that grind.
Because pricing isn’t just about what your product is worth it’s about what it costs to sell it.
If you haven’t priced this way before, here’s what to do today:
Write down everything it costs you to make and deliver a product.
List your fixed business costs even the small stuff.
Work out your breakeven point using both approaches:
Top-down is your current price profitable?
Bottom-up what price should you charge to make it work?
Check your gross margin. If it’s under 50%, you’ve got work to do.
And if the numbers don’t add up?
You have options:
You can either raise your prices
Reduce your costs
Change your product strategy
OR Improve AOV or conversion rate to offset volume
This stuff might not be sexy, but it’s critical.
Get your pricing right and everything else gets easier.
Your ads perform better. Your cash flow improves. And you sleep better at night.
If you want to go deeper on this and get the tools and templates I use to calculate pricing properly you can join the eCommerce Growth Made Easy community on Skool.
It’s free to get started, and you’ll find step-by-step training, tools, and direct support from me and the rest of the community.
And if you enjoyed this episode, don’t forget to like, follow or subscribe wherever you listen.
Now go run the numbers, and I’ll see you in the next episode.
