Brand margin analysis against discount depth
The short answer
A brand margin analysis ranks each brand on margin per unit after discounts and on average discount depth. Brands with deep discounts and thin margin per unit are the ones you are subsidizing. Check who buys them, since some bring in customers who go on to buy higher-margin brands.
Brand profitability in retail, worked through
Why it matters
Brands negotiate on sell-in terms and markdown support, so knowing which ones rely on your discounts strengthens every supplier conversation. It also shows where shelf space and marketing are funding a brand's volume at your expense.
The question to ask
Copy this into Lexi as written.
How to work it out
1. Calculate margin per unit. For each brand, subtract cost of goods from net sales and divide by units sold.
2. Calculate discount depth. Divide discount dollars by the pre-discount value of each brand's sales.
3. Check the customers. For brands with deep discounts, see whether their buyers go on to buy other brands at full price.
What the answer looks like
Illustrative output on sample data
Illustrative example: how Lexi answers this for an outdoor retailer. It ranks three of its top 15 brands on margin per unit and average discount depth.
- Brand A: $2.4 million net sales, $45 margin per unit, 8% discount depth
- Brand B: $3.1 million net sales, $30 margin per unit, 27% depth
- Brand C: $1.6 million net sales, $50 margin per unit, 12% depth
What the data shows
Brand B is the biggest by sales but earns the least per unit, with more than three times Brand A's discount depth.
What it means
Only 9% of Brand B buyers went on to buy another brand at full price within a year, so its discounts are not widening the customer base.
What to do
Negotiate supplier funding for Brand B promotions, or cut its promotion depth.
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Frequently asked questions
Why use margin per unit instead of margin percentage?
Margin percentage hides scale. A low-price brand can show a healthy percentage while earning little per unit sold, and a premium brand the opposite. Margin per unit shows what each sale actually contributes, which is easier to compare with the space and discount each brand takes.
Should I drop a brand I am subsidizing?
Not before checking its customers. Some discounted brands bring in shoppers who go on to buy higher-margin brands, which can justify the subsidy. If its buyers rarely buy anything else at full price, renegotiate terms or reduce its discount depth first, and drop it only if neither works.
How do I calculate discount depth by brand?
Divide the total discount dollars given on a brand's sales by the pre-discount value of those sales. Include markdowns, promotions and member discounts. Calculate it over one period across brands, and note how much of the discount each brand funded, since that changes who bears the cost.