Ecom Price to Weight Ratio

Something I've thought about for some years now in eCommerce is "price to weight ratio" as a way to sort of normalize margin potential for product categories in DTC.

100g of jewelry for example, can sell for $5k yet fit in an envelope & ship for $1 worth of stamps, yielding a price to weight ratio of $50k per kg and a price to shipping cost ratio of 5,000 : 1.

A 50kg table on the other hand, might sell for $5k yet require $500 worth of end customer shipping to yield a price to weight ratio of $100 per kg and a price to shipping cost ratio of 10 : 1.

A 1kg jacket might sell for $200 and ship for $10, yielding a price to weight ratio of $200 per kg and a price to shipping cost ratio of 20 : 1.

Huge difference in cost structure to fulfill to the end customer, and we see this reflected in predictable financial performance of companies in those industries that sell direct to consumer.

The lower your marginal cost of shipping gets, relative to your selling price, the more room you have in your overall cost structure.

This is also true on the production side, esp. if producing overseas.

That same table also cost $50 to ship by sea from China, eroding margins by another 1%. Ship by air, and that might be $500 depending on rates that day.

Compare that to jewelry, which can be shipped around the world and then some via the fastest air option available, for a fraction of that cost.

So the reason I like this ratio for eCommerce specifically is that shipping is inherently baked into the model. Production end logistics can be optimized by things like factory proximity, warehouse/3PL, full container shipping, etc. etc.

But the cost of last mile of delivery from warehouse (or factory!) to end customer is always applicable and will, without exception, be a function of weight.

That inherently makes some products easier to sell DTC, and some products more difficult.