Terms of Trade · Edition 2: The trading pack
Cost to serve
Definition
The fully loaded cost of taking one order from the click to the door and, where it applies, back again: payment fees, pick and pack, outbound carriage less what the customer paid, the allocated cost of returns, customer contact per order and the per-transaction technology beneath it. It sits between gross margin and contribution margin, and it is the reason a channel can grow revenue while earning less per order.
Field note
Cost to serve is the measure that surprises ecommerce directors when their bumper quarter leads to mass redundancies.
Board question
What is cost to serve per order this quarter, who owns the number, and which of its lines moved?
Applied through
Commercial Discipline in the Cat’s Whiskers; the Review measures against margin, and the Ecommerce Commercial Diligence read marks every growth assumption against contribution after this line.
Related terms