Unit economics is how the total revenue and costs are distributed to a single product unit. It’s a measure of how much you make in earnings or lose on each item sold.
A unit is one final item you sell – a pair of shoes, a water bottler, etc. Unit economics in ecommerce is calculated as follows:
UE = Price per unit - Variable costs
Many DTC brands want to scale fast and sell at a loss like Casper, which hurt their look just before IPO.
Unit economics helps you:
- Project revenue, break even and profits
- Optimize products, prices and marketing
- Evaluate growth plans and long-term marketing strategies