Product margin is the share of a seller’s profit from the sale of a single unit after deducting variable costs, expressed as a percentage of the selling price. In practice, it shows what portion of revenue remains to cover fixed costs and net profit.
How margin is calculated
The basic margin formula is simple, but it’s important to correctly include all variable expense items:
- Margin (%) = (Selling price — Variable costs) / Selling price × 100.
For a seller on Kaspi.kz, variable costs should include both direct and indirect items:
- product cost (purchase price or manufacturing cost);
- platform commission (percentage of price or fixed fee);
- logistics — delivery to the buyer and return logistics for returns;
- packaging and related materials;
- on-platform advertising (paid impressions, card promotion);
- taxes and fees, if treated as variable (for example, 12% VAT when included in the price).
Additionally, distinguish gross margin (excluding advertising and return costs) and operating margin (when all variable costs associated with the sale of a unit are included).
Why sellers need to monitor margin
Monitoring margin is not for academic reports but for making concrete decisions:
- pricing strategy: helps determine the minimum acceptable price to remain profitable;
- assortment management: helps decide which SKUs to keep, remove, or reorder less often;
- advertising investment: if a product margin is 15%, aggressive paid promotion can wipe out profit;
- pricing during promotions: estimate how many points below the regular price you can go and still stay profitable;
- returns analysis: identify products with high return rates that eat into margin and require changes in description or packaging.
For example, if the average margin in the "smartphone accessories" category is 28% and advertising eats up 12 percentage points, the net margin drops to 16% — critical if fixed costs are high.
Examples of calculations on Kaspi.kz
Below are three practical examples with real sums in tenge (тг), reflecting typical situations for sellers in Kazakhstan.
Example 1. Small accessory (phone case)
- product cost (purchase including supplier delivery): 800 тг;
- selling price on Kaspi: 1 800 тг;
- platform commission: 10% of the price — 180 тг (actual rate depends on category and agreement, often 5–15%);
- logistics (delivery and packaging): 250 тг;
- packaging materials: 50 тг;
- allocated advertising cost per unit: 80 тг;
- expected return-related cost per unit (small chance): 0 тг (or accounted separately as probability × return cost).
Sum of variable costs = 800 + 180 + 250 + 50 + 80 = 1 360 тг. Margin = (1 800 — 1 360) / 1 800 × 100 = 24.4%.
At ~24% margin, the item can absorb some fixed costs and modest advertising increases, but margins will quickly shrink if returns rise or if you run expensive promotion campaigns.
Example 2. Mid-price item (portable speaker)
- product cost: 8 500 тг;
- selling price on Kaspi: 14 000 тг;
- platform commission: 8% — 1 120 тг;
- logistics and packaging: 700 тг;
- allocated advertising per sale: 600 тг;
- average return cost per unit (including reverse logistics and restocking): 200 тг (adjusted by return rate in calculations).
Sum of variable costs = 8 500 + 1 120 + 700 + 600 + 200 = 11 120 тг. Margin = (14 000 — 11 120) / 14 000 × 100 = 20.6%.
With ~21% margin, this SKU is more resilient: you can invest more in targeted ads or bundle promotions, but still monitor returns and commission changes.
Example 3. High-value item (home appliance)
- product cost: 45 000 тг;
- selling price on Kaspi: 65 000 тг;
- platform commission: 7% — 4 550 тг;
- logistics and white-glove delivery allocation: 2 000 тг;
- warranty/after-sales provisioning per unit: 1 000 тг;
- allocated advertising and promotion per sale: 2 500 тг;
- expected return/replacement costs (low percentage, but higher absolute): 500 тг.
Sum of variable costs = 45 000 + 4 550 + 2 000 + 1 000 + 2 500 + 500 = 55 550 тг. Margin = (65 000 — 55 550) / 65 000 × 100 = 14.5%.
Even though the absolute profit is higher, the percentage margin is lower than in the previous example. For high-ticket items, monitor financing costs, warranty liabilities and the impact of promotions carefully.
Practical tips to increase margin
- negotiate better purchase prices with suppliers or consolidate orders to get discounts;
- optimize logistics: cheaper shipping contracts, better packaging to reduce returns and damage;
- segment advertising: invest more where margin and conversion justify it; measure CPA per SKU;
- improve listing conversion: better photos, descriptions and titles reduce need for paid promotion and lower return rates;
- bundle low-margin SKUs with higher-margin items to lift average margin per order;
- use targeted promotions and time-limited discounts instead of across-the-board price cuts;
- regularly review categories and discontinue persistent low-margin SKUs or renegotiate terms with suppliers.
Automation of calculations and accounting
To keep margin calculations accurate and scalable:
- maintain SKU-level cost accounting (purchase price per batch); use weighted average or FIFO depending on your accounting rules;
- integrate actual platform commission reports and logistics invoices into your accounting system to avoid manual errors;
- allocate advertising spend to the sales it produced (campaign-level attribution) so per-SKU advertising costs are realistic;
- automate price updates based on margin thresholds; set alerts if margin drops below target;
- periodically reconcile reported sales, refunds and commission adjustments from Kaspi.kz with your internal records.
Typical seller mistakes when calculating margin
- not including all variable costs: payment and platform fees, return logistics, allocated advertising and VAT, which overstates margin;
- poor allocation of advertising spend — using total budget across the catalog instead of attributing to the sales generated;
- ignoring return rates or treating returns as occasional rather than recurring cost;
- not updating purchase price after restocking or discounts, which skews margin over time;
- relying on manual spreadsheets without automation, increasing the risk of calculation errors.
Avoid these by standardising a cost card per SKU, automating imports of actual fees and conducting a monthly audit of margin calculations.
Часто задаваемые вопросы
- How to correctly include Kaspi commission and paid ads in the margin calculation for a specific SKU?
- Include the commission as a percentage of the actual selling price or as a fixed amount per unit; if the commission is refunded on returns, factor in the return probability. Allocate advertising costs to sales: divide the campaign budget or cost-per-click by the number of sales the campaign generated and add the resulting cost to the variable costs per unit. This gives a margin that reflects the real cost of acquiring each sale.
- How to calculate the minimum selling price to preserve a target margin (for example, 20%) after all variable costs?
- Use the formula: minimum price = total variable costs / (1 − desired margin). Include purchase price, platform commission, average delivery cost, packaging and allocated advertising costs in total variable costs. If there are fixed transaction fees or VAT, add them on top or include them in costs before dividing.
- Which variable cost items should be considered for products with a high return rate and how to account for them in margin?
- Besides standard costs, include reverse logistics, disposal or refurbishment costs, return commissions and average refund amounts to buyers. Multiply these additional costs by the expected return rate and add the result to the variable cost per unit. This yields an adjusted margin that is more realistic for pricing and advertising decisions.
- How to segment assortment by margin for purchasing and ad budget decisions?
- Split SKUs into groups — high-margin (e.g. >30%), medium (10–30%) and low (<10%) — and set rules for each: increase ad investment and expand assortment for high-margin items; optimise purchasing and logistics for medium-margin SKUs; for low-margin SKUs either raise price, stop selling, or negotiate better supplier terms and restrict paid promotion. Regularly review categories based on actual sales and cost data.
- How to account for bulk discounts and changing purchase prices in dynamic margin calculations?
- Track product cost by batches: use weighted average or FIFO in your accounting system and recalculate margin whenever purchase price changes. For step discounts, calculate margin for each price break and set price thresholds where the product remains profitable. Automate cost updates in the catalog so selling prices and margins recalc without manual errors.
- What are typical mistakes sellers on Kaspi.kz and other marketplaces make and how to avoid them when calculating margin?
- Common mistakes are omitting variable costs like payment and platform fees, return logistics, allocated ad spend and VAT, which inflates margin. Another frequent error is misallocating ad spend across the whole catalog instead of attributing it to the sales it produced. Avoid these by keeping a standard cost card per SKU, automating import of actual fees and running a monthly audit of calculations.
