Selling Less to Earn More: How We Doubled a Skincare Brand’s Net Margin by Strategically Cutting Sales
Client: a European skincare brand on Amazon.fr
Services: advanced Amazon Ads Management, E-commerce Profitability Analysis, Listing Optimization
Services: advanced Amazon Ads Management, E-commerce Profitability Analysis, Listing Optimization
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Executive Summary
A European skincare brand faced a dangerous paradox: their Amazon sales were high, but their net profit was dangerously low. Trapped in a "sales at all costs" mentality, their aggressive ad spend was consuming their margins, leaving them with a meager ~10% net profit. They were working harder, not smarter.
Studio.351 implemented a counter-intuitive, profit-first strategy. By conducting a deep profitability audit that included the client's Cost of Goods Sold (COGS), we made a bold move: we strategically cut inefficient ad spend, which led to a temporary, planned decrease in sales.
The result? Net margin doubled to over 20%, net profit jumped by 48% in the first month, and the business was repositioned on a foundation of sustainable, profitable growth.
Studio.351 implemented a counter-intuitive, profit-first strategy. By conducting a deep profitability audit that included the client's Cost of Goods Sold (COGS), we made a bold move: we strategically cut inefficient ad spend, which led to a temporary, planned decrease in sales.
The result? Net margin doubled to over 20%, net profit jumped by 48% in the first month, and the business was repositioned on a foundation of sustainable, profitable growth.
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The Challenge: the Tyranny of High Revenue
- Profitless Growth: with a net margin of only 9.98%, every sale was barely profitable. The business was spinning its wheels, generating high revenue but minimal actual cash.
- Bloated Ad Spend: advertising costs (€11,744) accounted for nearly 19% of total sales (€62,625), a completely unsustainable ratio for their product category.
- Lack of Product Focus: the ad budget was spread thinly across the entire catalog, with no clear data on which products were actually making money and which were losing it after all costs were accounted for.
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The Solution: the "Business Health" Turnaround
Our strategy was to treat the business like a surgeon treats a patient: first, stop the bleeding, then strengthen the core.
- Forensic Profit Analysis: we went beyond ACoS and ROAS. By integrating the client's COGS data, we performed a unit economics analysis on every single product to identify the true winners and losers.
- Strategic Pruning: we made the deliberate decision to stop funding unprofitable sales. We aggressively cut or paused campaigns and keywords that had a negative return after factoring in all costs.
- Profitable Core Reinforcement: we reallocated the newly freed-up, smaller budget with surgical precision to the handful of products and campaigns that demonstrated high net profitability.
- Building the Organic Foundation: we simultaneously optimized the listings of the most profitable products to increase their organic ranking and conversion rate, reducing their long-term dependency on paid ads.
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Our Process: the Three-Month Transformation
- Month 0 (The Audit): we conducted our deep dive, combining PPC data with the client's financial data (COGS). The analysis revealed that nearly 60% of their ad spend was generating sales at a net loss.
- Month 1 (The Great Cut): we cut the ad spend by over 50% (from €11.7k to €5.8k). As predicted, total sales dropped by 25%. However, because we only eliminated unprofitable sales, the net profit soared by 48.1% (from €6,251 to €9,259). The business was immediately healthier.
- Month 2-3 (Stabilization & Profitable Growth): with a stable, profitable baseline, we began to carefully scale the campaigns that were working. Sales stabilized and began to grow again (+3.3% in Month 2, +22% in Month 3), but this time, every sale was contributing significantly to the bottom line, with the net margin exceeding 21%.
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The Results: a New Paradigm of Profitability
- Net Margin Doubled: from 9.98% to over 21% in two months.
- Net Profit Increased by 73% over the first two months, despite a temporary drop in sales.
- Ad Spend Cut in Half: a 50.3% reduction in inefficient ad spend in the first month alone.
- Paradigm Shift: the client's entire business focus shifted from chasing revenue to maximizing net profit.
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FAQ
Are you saying you will intentionally reduce my sales?
In some cases, yes. We prioritize the financial health of your business above all else. If our analysis shows you are losing money on certain sales, we will recommend stopping them. This leads to a temporary, strategic dip in revenue but an immediate increase in net profit, setting the stage for future profitable growth.
How do you analyze profitability beyond the standard ACoS/ROAS metrics?
ACos and ROAS don’t reveal the whole story. Our deep analysis incorporates your Cost of Goods Sold (COGS), Amazon fees, and ad spend to calculate the true net margin per product. This allows us to make decisions based on real profit, not just advertising efficiency.
What happens after you cut the ad spend? Do we just sell less forever?
Not at all. The initial cut is Phase 1. Phase 2 involves reinvesting the saved budget with precision into your most profitable products and keywords. This creates a new, much higher baseline of profitability from which we can safely and sustainably scale your sales.
When does it make sense to prioritize profit instead of growth?
This is the right strategy when your cash flow is strained, your margins are thin, and you're unsure if your advertising is actually making you money. Establishing a profitable foundation is essential before you can afford to pursue aggressive, market-share-driven growth.
In some cases, yes. We prioritize the financial health of your business above all else. If our analysis shows you are losing money on certain sales, we will recommend stopping them. This leads to a temporary, strategic dip in revenue but an immediate increase in net profit, setting the stage for future profitable growth.
How do you analyze profitability beyond the standard ACoS/ROAS metrics?
ACos and ROAS don’t reveal the whole story. Our deep analysis incorporates your Cost of Goods Sold (COGS), Amazon fees, and ad spend to calculate the true net margin per product. This allows us to make decisions based on real profit, not just advertising efficiency.
What happens after you cut the ad spend? Do we just sell less forever?
Not at all. The initial cut is Phase 1. Phase 2 involves reinvesting the saved budget with precision into your most profitable products and keywords. This creates a new, much higher baseline of profitability from which we can safely and sustainably scale your sales.
When does it make sense to prioritize profit instead of growth?
This is the right strategy when your cash flow is strained, your margins are thin, and you're unsure if your advertising is actually making you money. Establishing a profitable foundation is essential before you can afford to pursue aggressive, market-share-driven growth.
