Ecom CFO Newsletter – What I Heard (and Didn't Hear) at MDS

Welcome to this issue of Ecom CFO Notebook – a weekly letter for 7–9 figure ecommerce founders and CFOs, sharing my perspective and stories for profitable growth

Sam here, and this week I was in New York City, speaking alongside Neil Patel and others at the MDS NYC Annual Chapter Event.

On-stage, it was a normal lineup of marketing and advertising talks (except for one awesome finance talk).

Off-stage, the real conversations - changing unit economics, supply chain optimization, deal flow, and general paranoia/anxiety.

I’ll never understand why ecommerce events don’t have more non-marketing talks.

US-China trade deal seems to be stabilizing with tariffs somewhere around 55%. COGS are going up for the foreseeable future.

Optimizing the next ad creative just isn’t going to move the needle as much as hammering supply chain and core unit economics.

Data from our Q1 Benchmark Report shows that the highest-performing brands of all sizes (and virtually all brands doing 8- to 9-figures) have gross margins over 70%.

So how can we maintain healthy margins in the wake of a 55% COGS hike? 

In most cases, unit economics needs to be the top priority - not marketing.

Prioritizing Unit Economics

The natural reaction of most founders faced with rising costs is to either cut fixed costs or try to make it up with more efficient marketing.

Fixed costs feel important and inherently more visible when looking at the P&L every month. 

When you get that Klayvio bill down from $4k to $2k, it feels like an important win. It’s also the easiest to do something about.

But look at the table below.

At scale, smaller improvements in unit economics are several times more impactful than cuts in fixed costs.

Now, you could make the argument that marketing efficiency gains also flow directly to the bottom line, allowing you to generate more revenue with the same ad spend, or hold revenue stable while spending less.

But consider this…

If you’re making a product in China right now, paying $3 for it and selling it for $10, your costs just went up by 55%.

You’re now paying $4.65 per unit, and your gross margin dropped from the goldylocks zone of 70% to an abysmal ~54% (on-par with the worst performing 7-figure brands in our recent study, and virtually unheard of among 8- and 9-figure brands).

If everything else stayed the same, profit shrinks by almost 75% (see the table below). 

To get back to even, you would need to get almost twice as efficient with ads - more considering pick-pack-ship is part of that variable cost figure.

Unlikely to happen.

Our latest report showed the average company saw a ~10% drop in ROAS in Q1, and when we looked at data for all of last year, the average was only a modest 2.6% gain.

The reality is, y’aint gonna be fixed-cost-cutting or marketing your way around tariffs. 

You need to be focused on unit economics.

So How Do You Do It?

When we think of unit economics, we often over-simplify to two things: COGS and price. 

But the reality is you have a breadth of opportunities (and you should be analyzing all of them).

In New York, I talked with one founder who saved money switching to a new type of packaging.

I talked with another who found an entirely new supplier (in a new country, not named China). 

And I know others who are implementing new refund policies, or bringing on inventory loss recovery partners to refurb and resell used product.

Generally you’re looking at some combination of:

• Product innovation

• Negotiating with suppliers

• Adjusting prices with customers

• Reexamining return policies and reverse logistics

Each of these obviously impacts conversion differently, so we have to put the options in context with your brand/audience.

If you want help doing that for your brand, grab a free spot on my calendar below.