A2X Newsletter | 2025 ecommerce P&L benchmarks for your clients
Have your clients ever asked you: “What financial trends are you seeing across your other ecommerce clients?” – or some version of this question?
Good news! A2X partner Ecom CFO recently released their 2025 Ecom Profit & Loss Statement (P&L) Benchmarks Report – focused on private ecommerce businesses doing between $1M to $100M in annual revenue.
To break it all down and give you access to this information, we invited Sam Hill, Founder of Ecom CFO, to guest-write this edition of our newsletter, highlighting trends, financial benchmarks, and insights to help you and your clients compare performance and plan for the future.
Without further ado… over to you, Sam!
Thanks, Geoff! A2X is powering 80% of our clients right now – so it’s a treat to be here.
As Geoff aptly called out, whenever we sit down with founders to review the books or plan the year ahead, they always ask some version of the same question: What are you seeing in the market?
As a fractional CFO firm, dedicated to publishing industry-best insights, we answered the question with our 2025 Ecom P&L Benchmarks Report, a deep dive on financial trends from a basket of private and public DTC brands.
The full report is 40+ pages, designed to help founders understand how their brand performed last year, and gut-check growth assumptions for the year ahead.
Today, we’ll unpack:
- The Big Picture
- Insights From Best and Worst Performers
- A Closer Look At Contribution Margin
- Planning For 2025
Before we do, here’s a quick primer on how to make sense of the data: For most metrics, we analyzed the trailing twelve months (TTM) from Dec. 2023, through the end of November, 2024, and compared it to the previous twelve-month period (Previous TTM).
Most sections also have a percentile breakout. These will help you understand how your client’s brand performs against others in their revenue cohort.
Alright, let’s get into it…
1. The Big Picture: Revenue Up, Margins Squeezed
Our data revealed a stark reality: In 2024, revenue grew by ~24% across private companies, but the gains weren’t evenly distributed.
The largest companies (those over $50M) saw outsized growth, while smaller brands often struggled with flat or declining revenue.
More concerning – most businesses under $50M experienced serious margin compression all the way down the P&L:
- Gross margin dropped ~2% for brands under $10M
- Contribution margin fell ~4-16% for brands under $50M
- EBITDA decreased dramatically for those same cohorts
Meanwhile, companies over $50M bucked the general trend (check out all that green):
2. Insights From Best And Worst Performers
So, what? If a brand is doing less than $50M, are they doomed?
Well, no.
Despite the fact that the industry is unquestionably going through a tough time, when we dug into best and worst performers across all cohorts, we found a few common (and controllable) behaviors:
SKU Rationalization
One of the biggest mistakes we see brands make is not having a systematic way to review and address low-profitability SKUs.
Partly, this is a matter of resources. Brands under $10M are always strapped for the time, money, and energy it takes to review the product mix. Also, ego is a factor. Ego is what makes founders…
- Slow to kill SKUs they have affection for (because they designed them)
- Over order low-profitability SKUs because they “need” to stay in stock
It’s understandable. But it’s a major stumbling block.
To combat it, brands need (at minimum) a realistic annual budget they can use to make dispassionate decisions about product mix throughout the year. But the ideal solution is a budget, plus a formal SKU rationalization process, to review and cut any underperformers.
Channel Diversification
Wholesale was an important part of the revenue narrative this year…
About half our private companies do some kind of wholesale business, and for them, revenue in that category roughly doubled. Wholesale also made up a larger segment of revenue for all cohorts.
Heading into 2025, brands that want to build antifragility, and reduce their reliance on Google and Meta, really need to be looking at this channel seriously.
Public companies, like e.l.f. Beauty (analyzed in the full report) offer useful insights on how to maximize wholesale wins. For example, e.l.f.’s masterful use of their DTC site to drive retail sales has made them, “the most productive brand on a dollar per foot basis” across their largest retailers (Target, Walmart, Ulta, Superdrug, Boots, and Douglas). Many of their tactics are replicable at a smaller scale for private brands.
Margin-Focused Innovation
Finally, successful brands focused on creative ways to improve margin:
- Self-insurance programs: One client reviewed a third-party insurance app and found it was actually creating customer confusion. By implementing their own program, they improved margins while enhancing customer experience.
- GWP > Discounts: Brands increasingly used gift-with-purchase rather than straight discounts, providing higher perceived value to customers at lower actual cost.
- Content Production: We saw several clients transition from paid creators and influencer content to building content production in-house.
Our take for brands? Generally, they should major in the majors, first. That means keeping a close eye on COGS and ad spend. But after that, even small gains like above can add up as you work your way down the P&L.
3. Zooming In On Contribution Margin
One of the parts of the report we’re most proud of is our deep dive on contribution margin – perhaps the most fragmented and misunderstood metric in our industry.
Similar to elsewhere, losses were concentrated in the under-$50M cohorts. Companies under $10M saw the largest declines – nearly 16%. The $10M-$50M cohort was largely flat while the over $50M cohort actually expanded contribution margin by almost 30%.
One of the big reasons that it’s so hard to get your hands on good contribution margin benchmarks is that it’s not well-defined. Even when it is, it’s not well-reported.
And yet, as advisors, we know this metric is critical, driving decisions on:
- Pricing
- Product launches
- Channel / country launches
- Reverse logistics policies
- Supplier negotiations
- Media budgets
- And more…
We define contribution margin as gross profit, minus variable selling costs. We then divide that result by net revenue to get CM %.
As the percentile data above supports, brands should be targeting a baseline CM of at least 30% – with some exceptions for dropshippers and high volume/commodity resellers.
As paid spend is usually the largest or 2nd largest line item on the P&L, we’ve broken out total ad spend and ROAS.
On average, companies deployed more ad spend and ROAS increased last year…
ROAS is but one piece of contribution margin. As brands benchmark for 2025, we encourage them to focus on overall contribution margin first, and then ask the question: “Given my current unit economics, what does my ROAS have to be to achieve [Insert Target CM]?”
Speaking of which…
4. Advice Heading Into 2025
Based on our findings in the report, we’ve made the following call-outs for brands as they look to the year ahead…
- Everybody’s coming for your margin: Costs are rising in several areas, with no end in sight. Founders need to be proactive about protecting margin in 2025 (more on this throughout the report).
- Hope is not a strategy: Many went into 2024 hoping to drive revenue. When that didn’t materialize, they hoped Q4 would save them. Too much hope kept them from slashing fixed costs or under-performing SKUs. Don’t make this mistake in ‘25.
- Invest In A Budget: The most important thing you can do – have a budget that’s realistic, and holds you and your team accountable to goals. This report will help.
Download The Full Report…
While we got into the basics here in the newsletter, the full 40+ page report goes even deeper, breaking down:
- Detailed data on revenue, gross margin, CM, and EBITDA trends
- Closer look at things like refunds, G&A spend, fixed marketing costs, and more
- Insights from public companies like e.l.f. Beauty, Chewy, and YETI
- CFO Analysis of all the trends
- And more…
Download the complete report here
I’d love to hear your thoughts on the report – if there was anything that you found particularly interesting, other takeaways, or any questions about how we put it together. Reach out on LinkedIn if you’d like to get in touch.
Until then,
Sam Hill
Founder & CEO, Ecom CFO
