# E-Commerce Cost Classification Guide

## Purpose

Accurate cost classification is the foundation of break-even analysis. This guide provides a comprehensive taxonomy of e-commerce costs, categorized as Fixed, Variable, or Step-Fixed.

## Fixed Costs

Fixed costs remain constant regardless of how many units you sell (within a relevant range).

### Operations & Infrastructure
| Cost | Typical Range | Notes |
|---|---|---|
| Warehouse lease | $1,000-10,000/mo | Based on square footage and location |
| Office rent | $500-5,000/mo | If separate from warehouse |
| Equipment depreciation | $200-2,000/mo | Printers, scanners, computers |
| Utilities (base) | $200-1,000/mo | Warehouse + office |
| Internet & phone | $100-500/mo | Business-grade connectivity |

### Technology & Software
| Cost | Typical Range | Notes |
|---|---|---|
| E-commerce platform | $29-2,000/mo | Shopify, BigCommerce, custom |
| ERP/inventory system | $50-500/mo | TradeGecko, Cin7, NetSuite |
| Email marketing platform | $20-300/mo | Klaviyo, Mailchimp |
| Analytics tools | $0-500/mo | GA4 (free), Mixpanel, Amplitude |
| Customer service software | $20-300/mo | Zendesk, Gorgias, Freshdesk |
| Accounting software | $20-200/mo | QuickBooks, Xero |
| Design tools | $10-100/mo | Canva, Adobe, Figma |

### People (Non-Variable)
| Cost | Typical Range | Notes |
|---|---|---|
| Founder salary | $0-15,000/mo | Often deferred in early stage |
| Full-time employees | $3,000-10,000/mo each | Non-commission roles |
| Bookkeeper/Accountant | $200-2,000/mo | Retainer or part-time |
| Legal retainer | $200-1,000/mo | If applicable |

### Insurance & Compliance
| Cost | Typical Range | Notes |
|---|---|---|
| General liability | $50-500/mo | Required for most businesses |
| Product liability | $100-1,000/mo | Essential for physical products |
| Workers' compensation | $50-500/mo | Required if employees |
| Business licenses | $10-100/mo | Amortized annually |

## Variable Costs

Variable costs change directly with the number of units sold.

### Product Costs
| Cost | Typical Range | Calculation |
|---|---|---|
| Raw materials/COGS | 20-60% of price | Per unit from supplier |
| Manufacturing labor | $0.50-20/unit | If not in COGS |
| Quality control | $0.10-1.00/unit | Inspection cost per unit |
| Product customization | $0.50-10/unit | Engraving, monogram, etc. |

### Fulfillment & Shipping
| Cost | Typical Range | Calculation |
|---|---|---|
| Pick & pack labor | $0.50-3.00/order | 3PL rates or internal time |
| Packaging materials | $0.50-5.00/order | Boxes, fill, tape, inserts |
| Outbound shipping | $3-15/order | Carrier rates by zone/weight |
| Shipping insurance | 1-3% of declared value | Optional but recommended |

### Transaction Costs
| Cost | Typical Range | Calculation |
|---|---|---|
| Payment processing | 2.4-3.5% + $0.30 | Stripe, PayPal, etc. |
| Marketplace referral fee | 6-45% of sale | Amazon (15%), Etsy (6.5%), eBay (12.9%) |
| Marketplace FBA fee | $3-10/unit | Based on size and weight |
| Chargeback fees | $15-25/incident | Typically 0.5-1% of orders |

### Returns & Exchanges
| Cost | Typical Range | Calculation |
|---|---|---|
| Return shipping | $3-10/return | If brand pays return label |
| Inspection/restock labor | $1-5/return | Processing time |
| Product write-off | 20-100% of COGS | Items that can't be resold |
| Replacement shipping | $3-15/exchange | Full shipping cost |

### Marketing (Variable Component)
| Cost | Typical Range | Calculation |
|---|---|---|
| Paid acquisition (CPA) | $5-100/customer | Per acquired customer |
| Affiliate commissions | 5-30% of sale | Per referred sale |
| Influencer per-post | $50-5,000/post | If performance-based |
| Referral rewards | $5-25/referral | Per successful referral |

## Step-Fixed Costs

These costs are fixed within a range but jump at certain thresholds.

| Cost | Threshold | Cost Change |
|---|---|---|
| Warehouse staff | Per ~200 orders/day | +$3,000-5,000/mo per hire |
| Customer service rep | Per ~100 tickets/day | +$3,000-5,000/mo per hire |
| Shopify plan | Basic (1K orders/mo) → Shopify (5K) → Advanced (10K+) | $39 → $105 → $399 |
| 3PL storage | Per pallet or bin tier | Varies by provider |
| Warehouse space | Per square footage tier | Lease renegotiation |
| Phone system | Per seat/line | $20-50/mo per additional line |

## Classification Decision Tree

1. **Does the cost exist even if you sell zero units?** → Yes: Fixed or Step-Fixed. No: Variable.
2. **Does the cost change with every additional unit sold?** → Yes: Variable. No: Fixed or Step-Fixed.
3. **Does the cost jump at specific volume thresholds?** → Yes: Step-Fixed. No: Fixed.
4. **Is the cost directly traceable to a specific unit/order?** → Yes: Variable. No: Likely Fixed.