How to Choose Products with Sufficient Margins and Check Demand

Choose a product based on the amount left after purchasing, fees, advertising, packaging, and losses from returns. Before making a large purchase, compare several specific product items, set an acceptable test budget, and sell a small batch at the planned price.

Consider reordering when actual sales confirm demand, costs leave a sufficient contribution toward the store’s expenses, and stock does not tie up money needed for other payments. The owner sets the budget and decision criteria, the employee tracks sales and returns, and the accountant helps account for taxes and avoid counting expenses twice.

How to Calculate Markup, Gross Margin, and Contribution per Sale

To compare products, use the same basis: the price after discount and the cost of one unit sold. Decide in advance which costs are included in the cost price. For example, delivery from the supplier can be allocated across the products in a batch, but once allocated, it should not be deducted again as a separate expense.

• Markup, % = (selling price − cost price) / cost price × 100%. It shows how much was added to the cost price.
• Gross margin, % = (selling price − cost price) / selling price × 100%. It shows the share of the difference between price and cost in revenue.
• Contribution per unit = selling price − cost price − direct selling costs. For a working calculation, include fees, packaging, delivery paid by the store, allocated advertising costs, and expected losses from returns among direct costs.

Illustrative example: A product with a cost price of UAH 200 sells for UAH 400. The markup is 100%, the gross margin is 50%, and the difference between the price and cost is UAH 200. If direct selling costs are UAH 80, the remaining contribution is UAH 120.

This UAH 120 is not yet net profit. The store uses its total contribution to cover rent, wages, software, other expenses, and taxes not accounted for earlier. The owner should also assess the total contribution for the period: a high margin percentage on a product with only occasional sales may not generate enough money to run the store.

Which Categories to Include in the First Comparison

Make a short list of products that suit your store’s customers and are available from suppliers in small batches. The options below are business hypotheses to test. Demand, repeat purchase frequency, and an acceptable price must be established in your own sales channel.

For each category, choose a specific model, size, and configuration. One stock keeping unit (SKU) is a separate product variant in the inventory records. Assess different cable lengths or product volumes separately: their costs and demand may differ.

Product Selection Matrix Before Ordering

Complete the matrix for each item. Enter figures, supplier terms, and your own observations in the cells. If an answer is unknown, decide how to obtain it before purchasing or during a limited test.

Do not add up the ratings mechanically. One critical circumstance may stop a purchase: for example, the batch cannot be sold before its expiry date, or the supplier requires an amount that would leave the store short of funds for mandatory payments.

Illustrative Calculation for Three Products: What Remains After Costs

All figures in this example are invented to demonstrate the calculation. We compare an organizer, a cable, and a desk lamp. For each item, we assume ten completed sales for which payment was not refunded. Cost price includes the purchase and allocated delivery to the store. The price is the actual selling price without additional discounts.

The illustrative payment service and marketplace fees together are 5% of the price. Advertising cost UAH 400, UAH 600, and UAH 1,800, respectively; the costs are divided by ten completed sales of each item. The returns row includes expected non-recoverable losses per completed sale: reverse logistics, repackaging, or markdown costs. Taxes and general store expenses are not included in the table.

Organizer calculation: 400 − 200 − 20 − 12 − 40 − 8 = 120 UAH. For the cable: 250 − 100 − 12.50 − 10 − 60 − 17.50 = 50 UAH. For the lamp: 800 − 500 − 40 − 25 − 180 − 75 = −20 UAH. The cable has the highest markup, but the organizer leaves more money per unit.

The owner may approve another small batch of organizers if sales velocity and available cash allow it. For the cable, assess whether total contribution is sufficient in light of employee time. Under these conditions, do not reorder the lamp without changing the price, purchase terms, or costs. Recalculate after any change.

How to Test a Small Batch

1. Describe the offer. The owner or buyer records the specific product, customer, price, sales channel, and reason for choosing it. For example, a customer needs an organizer for a drawer of a particular size.
2. Obtain a sample and supply terms. The responsible employee inspects the product and checks its dimensions, completeness, packaging, and customer information. The buyer agrees in writing on the price, minimum batch, timeframes, and defect handling procedure.
3. Set test limits. The owner sets the purchase amount, advertising budget, evaluation period, and acceptable losses. The batch size should allow demand to be assessed while leaving money for current operations.
4. Set aside a refund reserve. In addition to expected losses in the calculation, set aside available funds for customer refunds. A full refund creates a cash requirement even when the product can be resold.
5. Start selling under the planned terms. The employee records the date, price after discount, channel, fees, advertising costs, refusals, and returns. Mark periods when the product was unavailable separately so that a lack of sales is not mistaken for a lack of demand.
6. Compare plan with actual results. After the test, the responsible employee counts completed sales and actual costs. Keep incomplete orders and possible subsequent returns as separate items for the next review.

For advertising of a specific item, divide its cost by the number of completed sales of that item. If an ad leads to several products, set a clear allocation method in advance and apply it consistently. Include campaign costs that generated no sales in the test results as well.

Views, likes, and questions can help improve the offer. For the purchasing decision, separately track paid completed orders and the reasons for refusals and returns. If the test used a discount, the result describes demand at that price; the ability to sell at a higher price requires a separate test.

When to Replenish Stock, Change the Offer, or Stop Purchasing

Set your own decision criteria before the test begins. The required contribution depends on store expenses, sales volume, product risk, and delivery times. One margin percentage for all products does not provide a sufficient basis for purchasing.

• Replenish stock if sales recur at an acceptable price, actual contribution meets your plan, and returns and time to sell remain acceptable.
• Change the offer if there is a specific reason for refusals: unclear dimensions, compatibility, configuration, or delivery terms. Choose one change and set its budget so you can assess its effect on the result.
• Stop repeat purchases if sales do not cover direct costs, stock is accumulating, quality causes repeated complaints, or stock threatens current payments.

To plan the next batch, calculate the average number of units sold per day while the product was in stock. If you order batches at set intervals, multiply average daily sales by the sum of two periods: the delivery lead time and the interval until the next order. Add safety stock for sales fluctuations and supplier delays, then subtract available stock and units already ordered that will arrive in time to cover those sales. If the result is negative, the calculated need for a new purchase is zero. The owner should compare the resulting quantity with the budget and expiry date, and the employee should check whether current stock will last until the shipment arrives.

Review the reasons for returns regularly. If customers choose the wrong size, add precise measurements to the description. If a defect recurs, stop replenishment until the issue with the supplier is resolved. If the product sells only after a substantial discount, recalculate its contribution at the actual price.

How to Present a Product and Advertise a Test Offer in Ukraine

Before sales begin, prepare information that enables customers to make an informed choice. Article 15 of Ukraine’s Law “On Protection of Consumer Rights” No. 1023-XII provides for information to be given before purchase, including the product name, main properties and quantity, price and purchase terms, safe use instructions, and information about the manufacturer and seller. For the relevant product, also account for the date of manufacture, storage, expiry date, warranty obligations, and specific information requirements for that product.

The employee preparing the product listing should obtain this information from the supplier and align the description with the actual configuration. A seller is not released from liability because the manufacturer or importer did not provide the required information. The consumer price must include all taxes and mandatory charges payable at the time of purchase.

For an advertising test, use accurate specifications and substantiated claims. Articles 7–10 of Ukraine’s Law “On Advertising” No. 270/96-VR set requirements for accuracy and advertising identification and prohibit unfair and hidden advertising. Paid advertising content in media or a creator’s promotional post for compensation must be marked with the word “реклама” (“advertisement”) under Article 9. Prices in advertisements for goods sold in Ukraine must be stated in hryvnias.

If you test a discount, apply it to a product you sell yourself, for a defined limited period, at a price below the usual price. Show the previous and new prices. If you call an offer a “sale,” it must cover all goods at a particular location or a clearly defined group of goods, run for a limited time, and provide prices below the usual prices.

An advertisement for a discount or sale must state the location, start and end dates, and discount amount or the ratio of the new price to the previous one. An advertisement for a discount or sale in audio media must specify a source of information where the discount or sale terms can be learned.

Before ordering advertising, the owner should find out whether a certificate, special permit, or license is required to manufacture or sell the product. Article 8 of the Law “On Advertising” prohibits advertising such products if the manufacturer or seller does not hold the relevant document. If the advertiser is a resident of Ukraine, they must also confirm that the relevant register contains information that the required license or permit has been issued to the person conducting the advertised activity, or to the product’s manufacturer or seller. Without this information, ordering the dissemination of the advertisement is prohibited.

How to Compare Product Stock, Prices, and Cost Prices in Torgsoft

In Torgsoft, open “Склад → Стан складу” (Warehouse → Stock Status). Select the required accounting center—the store or warehouse in the program. To compare several storage locations, use the “Усі склади” (All warehouses) toggle and select warehouses. Use the column settings to display quantity, unit of measure, cost price, retail price, and discounted price. The employee should compare like units: package with package, piece with piece. Check the accounting cost price against actual purchase expenses, and add fees, advertising, and losses from returns separately to the working calculation.

For a selected item, open “Рух товару” (Product Movement) to review stock changes; for further analysis, add products to the turnover statement by quantity or cost. After deciding to replenish stock, set a minimum stock level and use the “Закінчується товар” (Low Stock) filter. Products whose retail price is equal to or below cost price are highlighted in red. A separate filter can find a discounted price below cost. For a profitability decision, still calculate the full costs of the specific sale.

What to Record Before Reordering

Keep a short record for each tested item: test period, number of completed sales, actual price, cost price, direct costs, reasons for returns, stock on hand, and the owner’s decision. Before placing a new order, obtain an up-to-date supplier offer and recalculate contribution: a change in purchase price or delivery cost can change the decision even if demand remains the same.

Official Regulatory Sources

• Law of Ukraine “On Advertising” dated 03.07.1996 No. 270/96-VR: Article 7 — advertising principles; Article 8 — general requirements, permits, discount advertising, and price statements; Article 9 — advertising identification; Article 10 — unfair advertising.
• Law of Ukraine “On Protection of Consumer Rights” dated 12.05.1991 No. 1023-XII: Article 15 — information about products, prices, discounts, and sales; liability for inadequate information.