Profit Governance

Negative Margin Order

Definition

An order where the total variable costs (COGS, shipping, discounts, payment fees) exceed the revenue collected, resulting in a net loss on the transaction.

By Herzel MishelFounder, AgentisLast reviewed

A negative margin order is any transaction where the merchant loses money after accounting for all variable costs. These orders are more common than most operators realize, especially during promotional periods. Negative margin orders typically result from margin collisions: a deep discount applied to a product with recently increased COGS, shipped to an expensive freight zone, with payment processing fees further compressing the remaining revenue. The insidious aspect is that negative margin orders are often high-volume orders driven by aggressive promotions, the very orders that look like growth metrics are succeeding. Without a per-order margin check, these orders flow through to fulfillment unchecked. Agentis identifies negative margin orders before they ship by evaluating all cost components within 60 seconds of each order being placed, then flagging the order or automatically holding it before fulfillment under rules the merchant approves.

Sources

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