Product & Sourcing: Why What You Sell Matters More Than How You Sell It

Most ecommerce businesses grow to £10 million by adding. More products, more categories, more suppliers, more options. It works until it doesn't.

The problem rarely announces itself. Revenue keeps climbing. The catalogue keeps expanding. But somewhere beneath the surface, margin is quietly eroding. A handful of products are carrying the business while hundreds of others sit in the warehouse, tying up cash and diluting focus.

This is the product and sourcing problem, and it's one of the most expensive issues a scaling ecom brand can face because it compounds. Every underperforming SKU doesn't just fail to earn. It costs you in warehousing, in photography, in marketing spend, in attention. It takes up space on the site and in the supply chain that a winning product could have occupied instead.

The Core Challenge: Visibility at the Product Level

At £1M, you can feel which products are working. At £10M+, you can't. The catalogue is too big, the data is too scattered, and the metrics most teams rely on (revenue, units sold) tell an incomplete story.

A product can be your top seller by volume and still lose money once you account for cost of goods, shipping, returns, and the marketing spend it took to move it. The reverse is also true: a product buried on page three might have exceptional margins and a loyal repeat audience, but nobody knows because it's never been given a chance.

The problem isn't a lack of data. It's the absence of a framework that connects sourcing decisions to commercial outcomes.

What Good Looks Like

The best product teams don't just ask "what's selling?" They ask:

What's actually profitable? Not at the gross revenue level, but after cost of goods, after operational costs like shipping and transaction fees, and after marketing spend. This is the difference between knowing your top-line and understanding your true product-level contribution.

What earns its marketing spend? Some products are profitable on their own but become unprofitable once you factor in what it costs to acquire the customer who buys them. Others look expensive to acquire but generate repeat purchases that make the initial spend worthwhile.

What should we double down on vs. cut? Range rationalisation is one of the most powerful levers a £10M+ brand has. Reducing the catalogue by 20-30% and reinvesting that focus into winners often increases both revenue and profit simultaneously.

What should we source next? Understanding which product attributes (category, price point, margin profile, seasonality) drive the best commercial outcomes helps you source smarter, not just more.

Where Most Teams Get Stuck

The data exists, but it lives in silos. Cost of goods is in the ERP. Marketing spend is in the ad platforms. Returns data is in the OMS. Revenue is in Shopify. Getting a true picture of product-level profitability means pulling all of these together, and most teams don't have the infrastructure to do that cleanly.

So what happens? Buyers make decisions based on gut feel and top-line revenue. Marketing promotes whatever has the most stock. Finance sees the blended margin and can't explain why it's declining. Nobody has the full picture, so everyone optimises their slice without seeing the whole.

How Dema.AI Solves This

Dema.AI was built to connect these dots. The platform ingests data from your ecommerce platform, ad channels, and cost structures to give you a unified view of product performance, not just revenue, but real profitability.

True product-level profit metrics. Dema calculates profit at multiple levels — after cost of goods (Gross Profit 1), after operational costs like shipping and transaction fees (Gross Profit 2), and after marketing spend (Gross Profit 3). This means you can see exactly what each product contributes after everything is accounted for, not just what it generates at the top line.

Returns-adjusted profitability. Products that look strong on paper can look very different once returns are factored in. Dema provides net profit metrics that account for estimated and actual returns, so you're making decisions on what customers actually keep, not just what they order.

Attribution-aware product analysis. Not all products are acquired equally. Dema's multi-touch attribution connects marketing spend to product-level outcomes, so you can see which products are worth investing in and which are only moving because of unsustainable ad spend.

Product segmentation and ranking. Rather than scrolling through thousands of SKUs, Dema lets you build dynamic product segments, grouping products by performance tier, margin profile, sell-through rate, or any combination of attributes. This gives your buying and merchandising teams a clear framework for range review, pricing decisions, and sourcing priorities.

The commercial feedback loop. When your product team can see what's actually making money, they source differently. When marketing can see which products are worth promoting, they spend differently. Dema creates the shared language between these functions that most ecom teams are missing.

The Bottom Line

At £10M+, your product range is either your biggest asset or your biggest liability. The difference comes down to whether you have the visibility to tell one from the other. Most brands are flying blind at the product level, they know what sells, but not what earns.

Getting this right doesn't just improve margins. It simplifies operations, sharpens marketing, reduces inventory risk, and focuses the entire business on what actually works.

Product isn't just the first block in the ecommerce operating model. It's the foundation everything else is built on.