Unit Economics for Humans (No MBA Required)

TLDR

Your unit economics and customer economics are married. They need each other to survive. One tells you if your product makes money. The other tells you if your customers do. Most businesses optimize one and ignore the other, then wonder why their 65% gross margin beauty brand is burning €200k per month, or why their food product that "works" at retail is sitting in a distributor's warehouse accruing fees. This guide shows how these two frameworks work together across Food & Beverage, Beauty, and Fashion—and shares the uncomfortable truths that don't show up in your P&L until it's too late.

The €47 Problem Nobody Warned You About

A beauty brand raised €800k six months ago. Now they have three months of runway left.

Their margins look great. 78% gross margin on a €45 serum. Customer acquisition cost is €85. Everything points to success.

Here's what the spreadsheet didn't show:

They wholesale the serum for €22. Retailer sells it for €45. That's 51% margin on wholesale—solid.

Except: their primary retail partner takes 60 days to pay. When payment comes, there's a 3% early payment discount to get cash sooner (which they always take because: runway). Plus 8% markdown allowance for slow-moving inventory. Plus 5% co-op marketing fees.

Actual received price per unit: €19.14.

The painful part: they're also running DTC. Customer acquisition cost of €85. Average order value of €67 (1.5 products per order). COGS of €15 per order. That's €52 gross margin.

Then comes reality:

Return rate: 12%. Shipping cost: €5.50 outbound, €4.20 return processing. Payment processing: 2.9% + €0.30. Fulfillment and warehousing: €2.80 per order. Packaging: €3.10. Marketing allocation per order (CAC ÷ projected orders per customer): €53.

Actual contribution margin per DTC order: negative €15.

They were losing money on every single DTC sale while telling investors they had "strong unit economics."

This is what happens when you optimize unit economics (wholesale margin looks great!) without understanding customer economics (you're bleeding on acquisition). Or when you focus on customer LTV projections without tracking what each channel actually nets per transaction.

Unit Economics + Customer Economics: Why You Need Both Lenses

Here's what becomes clear after working across hundreds of brands:

Unit economics asks: What happens to one product as it moves through your distribution model? How much of that €6.99 retail price actually makes it back to you after every middleman, fee, return, and delay takes their cut?

Customer economics asks: How much does it cost to acquire one customer? How much will they spend over their lifetime? How many products do they buy per order? How often do they come back?

Most businesses pick one lens and stick with it:

• Food & Beverage businesses obsess over unit economics because distribution is so complex. They can tell you their exact landed cost per unit, but can't tell you their repeat purchase rate or customer payback period.

• Beauty DTC brands obsess over customer economics because CAC is so visible (thanks, Facebook Ads Manager). They can tell you their LTV:CAC ratio, but don't realize their contribution margin per order is getting destroyed by returns and shipping.

• Fashion brands try to do both and often do neither well, because wholesale and DTC require completely different math.

The thing is: you can't just pick one. They're married. And when one fails, the other follows.

Food & Beverage: Where Distribution Eats Your Lunch (Literally)

Let's start with Food & Beverage, where unit economics is disguised as a series of mandatory donations to middlemen.

Consider a craft beverage brand. Organic ingredients. Beautiful branding. Retailer loves it. Wholesale price: €3.20 per bottle. Retail price: €5.99. COGS: €1.80.

On paper: €1.40 gross profit per unit. That's 44% margin. Investors love it.

Here's what actually happens to that €3.20:

Distributor margin: 20% = €0.64 gone

Slotting fees: €45,000 to get into 120 stores = €0.38 per unit (first production run of 118,000 bottles)

Promotional allowances: 12% for end-cap displays and weekly flyers = €0.38 per unit

Damaged goods / shrinkage: 3-4% = €0.10 per unitBroker commission: 5% = €0.16 per unit

What you actually receive per unit: €1.54

Your COGS: €1.80

Loss per bottle: €0.26

Many businesses don't discover they're unprofitable until Month 7, when the warehouse manager asks why product keeps shipping that's coming back as credits.

Now here's where customer economics enters the picture:

In Food & Beverage, repeat purchase rate is critical because it's the primary method to reduce marketing percentage. If customers buy your beverage 6 times per year instead of once, you can afford much higher trade spend in Year 1 because you'll recover it in Year 2-3.

But here's the trap: brands often assume gross margin and marketing expenses will automatically improve with scale, spending recklessly on this false assumption.

The reality? Your gross margin might worsen with scale in Food & Bev because:

• Larger retailers demand higher trade spend

• You're now in 500 stores instead of 120, so your slotting fees per unit stay roughly the same (you're just spreading €187,500 across more doors)

• Promotional expectations increase as you grow

The fix isn't to abandon retail. The fix is to understand both lenses:

Unit economics lens: You need €2.10 minimum after all deductions to cover your €1.80 COGS and leave €0.30 contribution margin. Work backwards from there. If distributor + retailer takes 50% of retail price, you need a €6.30 minimum retail price point, not €5.99.

Customer economics lens: Track repeat purchase rate by channel. An organic snack brand discovered their Whole Foods customers had 67% annual repeat rate vs 34% from conventional grocery. Same product. Different customer behavior. They shifted trade spend accordingly and became profitable in 11 months.

The two lenses together: If your unit economics are thin (€0.30 per unit contribution), you need HIGH repeat purchase rates to make the customer relationship profitable over time. If customers only buy once, you've made €0.30 total. If they buy 8 times per year for 3 years, you've made €7.20 per customer. Now your economics work.

Beauty & Personal Care: Where CAC Meets Returns and Nobody Wins

Beauty presents the opposite problem.

Customer acquisition cost for beauty brands has increased 60-80% from 2019 to 2025. The average CAC now sits around €127 for online beauty brands.

Every beauty business knows their CAC. It's staring at them from their Facebook Ads dashboard every morning. What they don't track well: what happens after the customer clicks "buy".

Consider a skincare brand selling a €55 moisturizer:

Customer Acquisition Cost: €105 (blended across Meta, Google, influencer partnerships)

Average Order Value: €78 (1.4 products per order)

COGS per order: €22 (28% of AOV)

Gross Margin: €56 (72%)

Looks solid, right? €56 margin vs €105 CAC means break-even after 1.9 orders. With skincare customers averaging 104 days between orders, that's profitability in about 6-7 months.

Except:

Return rate: 11% (customers "bracket"—they buy your serum plus two competitors to test)

Shipping outbound: €5.50 per order

Return shipping + processing: €4.20 per return

Payment processing (Shopify + Stripe): 3.1% + €0.30 = €2.72

Fulfillment & warehousing: €2.80 per order

Packaging: €3.10 per order (boxes, tissue paper, thank you card, stickers)

Marketing allocation: €105 CAC ÷ 1.6 projected orders = €65.63 per order

Revised contribution margin per order:

• Gross Margin: €56.00

• Less shipping: €5.50

• Less payment processing: €2.72

• Less fulfillment: €2.80

• Less packaging: €3.10

• Less returns (11% × [€78 AOV + €5.50 + €4.20 return cost]): €9.65

• Less marketing allocation: €65.63

Actual contribution margin per order: negative -€33.40

The first order is unprofitable by design—the bet is on repeat purchases.

Now here's where it gets worse. Beauty brand retention rates average only 23%, meaning about 1.6 orders per customer.

At 1.6 orders per customer with negative €33.40 first order and €31.63 contribution on subsequent orders (no marketing allocation), the math is:

• Order 1: -€33.40

• Order 2: +€31.63

• Total per customer: -€1.77

Still underwater.

The unit economics (contribution margin structure) looked fine at first glance. The customer economics (repeat rate too low, payback impossible) are what kill profitability.

Here's how this gets fixed:

Option 1: Improve unit economics

• Reduce CAC by shifting to referral programs. Referral customers typically cost 4x less to acquire and have 37% higher retention.

• Reduce returns through better product education, ingredient transparency, or samples

• Increase AOV through bundles (if AOV reaches €95, contribution margins improve significantly)

• Reduce fulfillment costs through better warehouse operations or 3PL negotiations

Option 2: Improve customer economics

• Increase repeat purchase rate through subscriptions. Subscription models increase repeat purchases by 30-50% in beauty verticals.

• Segment customers by behavior—the 23% who buy 3+ times are profitable; focus retention spend there

• Accept that 50% of customers will only buy once, and either reduce CAC for cold acquisition or stop acquiring them

The brands that work do both. They optimize contribution margin per order and engineer repeat behavior into their product model (subscriptions, refills, multi-step routines that require reordering).

Fashion & Apparel: Where Returns Are a Line Item (And Maybe Your Biggest One)

Fashion is its own special kind of math torture.

Fashion return rates sit at 30-40% for online orders, compared to 20% across all e-commerce. In the US alone, returns cost fashion retailers $743 billion in lost sales in 2023.

Consider a DTC apparel brand selling a €89 dress:

COGS: €31 (35%)

Gross Margin before returns: €58 (65%)

Except returns-related costs like reverse logistics, inspection, repackaging, and depreciation can cut gross margins by up to 20% in fashion.

Here's what a 30% return rate does to your economics:

Per 100 orders:

• 70 keep the dress (€58 margin × 70 = €4,060)

• 30 return the dress

Cost of those 30 returns:

• Outbound shipping: €5 × 30 = €150

• Return shipping: €4 × 30 = €120

• Processing / inspection / restocking: €3 × 30 = €90

• Markdown or destruction: 40% of returns can't be resold at full price (12 units × €89 = €1,068 revenue lost, minus €31 COGS recovered = €696 net loss)

Total return cost: €1,056

Net margin after returns: €3,004 on €8,900 revenue = 33.7% actual margin

The "65% gross margin" is actually 33.7% after returns. And customer acquisition cost hasn't been factored in yet.

Fashion customer acquisition averages €130. If actual post-return contribution margin is €30 per order (after adding fulfillment, payment processing, and marketing allocation) and CAC is €130, you need 4.3 orders to break even.

The symbiosis in fashion:

Unit economics: Returns destroy contribution margin per transaction. A €58 gross profit becomes €30 after return costs, fulfillment, and other variable expenses.

Customer economics: You're spending €130 to acquire someone who might return their first order (30% chance), never come back (because the fit was wrong), and you've now lost €100 on that customer.

Fashion brands that survive do this:

1. Track returns by SKU and use it in merchandising decisions. Return rates should be factored into which products to feature and recommend more broadly. If your floral midi dress has an 18% return rate and your black t-shirt dress has a 42% return rate, the one with lower returns should get more marketing spend.

2. Improve unit economics through better fit technology. Sizing is the top reason for online apparel returns, cited by 53% of respondents. Brands using AI fit recommendations see meaningful improvements.

3. Shift customer behavior. Some fashion brands now charge for returns after the first one, offer store credit instead of refunds, or incentivize customers to keep items through loyalty points or exclusive access. These tactics improve both unit economics (fewer returns) and customer economics (encourages customers to be more selective upfront, leading to better matches).

The key insight: In fashion, unit economics and customer economics are particularly intertwined because returns are both a per-unit cost AND a customer behavior. You can't fix one without fixing the other.

The One Dashboard You Actually Need (But Probably Don't Have)

Here's what should be tracked monthly:

Combined Unit + Customer Economics Dashboard

Metric	Target	Example	Status
UNIT ECONOMICS
Contribution Margin per Unit/Order (fully loaded)	€25+	€18	⚠️
Return/Damage Rate	<5%	12%	🔴
Payment + Shipping as % of AOV	<12%	18%	⚠️
Fulfillment + Warehousing per Order	<€3	€4.20	⚠️
CUSTOMER ECONOMICS
Customer Acquisition Cost (CAC)	<€80	€105	🔴
Average Order Value (AOV)	€90+	€78	⚠️
Repeat Purchase Rate (12 months)	>30%	23%	🔴
Orders per Customer (12 months)	3+	1.6	🔴
THE MARRIAGE
Contribution Margin × Orders per Customer	€75+	€28.80	🔴
Customer Payback Period (months)	<6	11	🔴
LTV:CAC Ratio	3:1+	0.9:1	🔴

The bottom section—"The Marriage"—is where the real picture emerges.

You can have great unit economics (€25 contribution margin per order!) and terrible customer economics (but they only order once!).

Or great customer economics (high repeat rate!) and terrible unit economics (but contribution margin is €8 per order!).

You need both.

The Uncomfortable Truth About Scale

Here's what becomes clear after working across industries:

Scale doesn't fix broken unit economics.

And scale doesn't fix broken customer economics.

Scale makes both problems bigger, faster, and more expensive.

A food brand doing €2M in revenue was losing €0.15 per unit but had raised enough money to "grow into profitability." Eighteen months later they were doing €6M in revenue and losing €900,000 annually.

They scaled a broken model.

The fix isn't "grow faster." The fix is:

1. Understand your unit economics by channel (wholesale, DTC, Amazon, specialty retail)

2. Understand your customer economics by cohort (acquisition month, first purchase channel, product category)

3. Find where both work together (maybe DTC + subscription is profitable, but DTC + one-time-purchase isn't)

4. Kill everything else, even if it's revenue

This is uncomfortable. It means saying no to revenue. It means pulling out of retail accounts. It means raising prices and losing customers.

But you can't optimize your way out of a model that doesn't work at the unit level.

What To Track Starting Now

Here's the framework:

For Unit Economics:

☐ True contribution margin per unit/order after all variable costs (COGS, shipping, returns, payment processing, fulfillment, warehousing, packaging, marketing allocation)

☐ Return/damage rate by product and channel

☐ Time-to-payment by channel (cash conversion matters)

☐ Hidden fees (slotting, co-op marketing, early payment discounts, chargebacks)

For Customer Economics:

☐ Customer Acquisition Cost by channel (true all-in cost)

☐ Repeat purchase rate by cohort

☐ Orders per customer by cohort

☐ Time between orders

☐ Payback period (when does contribution margin recover CAC?)

For The Marriage:

☐ Contribution Margin × Orders per Customer = Total Customer Profit

☐ LTV:CAC ratio (target: 3:1 minimum)

☐ Which combinations of channel + customer type are actually profitable?

Then ask: "If we only did the profitable combinations, would we still have a business?"

If the answer is yes: do that.

If the answer is no: fix the model before you scale it.

Disclaimer

All data and calculations in this article are simplified for illustration purposes. Actual results depend on each company’s product mix, margins, service levels, and supply chain structure.

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