Profit Model for SKUs: The Math I Run Before I Say “Yes” to Any Home Décor Line

The first time I got burned, it wasn’t dramatic.

The sample looked perfect under showroom lights. The photos were clean. The story was easy. I approved the SKU.

Then the shipment landed. A small percentage arrived damaged. A few pieces varied just enough to trigger customer complaints. The replenishment timing slipped by a couple weeks, and suddenly I was staring at a markdown calendar instead of a reorder plan.

That’s when I stopped “buying products” and started buying a profit model for SKUs.

Because here’s the uncomfortable truth most buyers learn the hard way: retail runs on thin oxygen. Deloitte reports the world’s largest retailers average a net profit margin around 4.3%—which means one preventable mistake in cost, quality, or timing can erase your entire win. And if you think returns won’t touch home décor, the industry-wide scale should still scare you straight: NRF reported $743B in returns in 2023 (about 14.5% of sales).

So if you’re a supplier, manufacturer, or sourcing partner, here’s what I actually want from you:

Not cheaper quotes. Not trend decks. Not “we can do it.”

I want a merchant profit plan—a SKU-level plan that survives real life.

Why a “profit model for SKUs” beats a “great product” every time

A buyer’s job isn’t to find beautiful items. It’s to build an assortment that performs—through freight swings, inventory pressure, and promotional gravity.

McKinsey has been blunt about what happens when inventory rises: retailers get forced into heavy markdowns, and margin pressure compounds with logistics costs. Translation: even a good-looking SKU can become a bad business decision if it isn’t engineered for sell-through and replenishment.

And markdowns aren’t a rounding error in many categories. Bain notes that in soft goods, markdowns can consume a significant share of net sales—sometimes 20%–50%—depending on the retailer and model. Home décor behaves differently than fashion, sure—but the lesson is universal: if you don’t plan the exit, the exit plans you.

A real SKU profitability model doesn’t start at “What’s the factory price?”
It starts at: What has to be true for this SKU to be reorder-ready?

The 7-line profit model for SKUs (the version I actually use)

When I’m evaluating a new SKU, I’m quietly building a one-page model. It looks simple. It isn’t.

Target Retail (MSRP)
Planned Promo / Markdown Allowance (not “if,” but “how much and when”)
Net Sales After Discounts
Return / Damage Allowance (especially for fragile décor)
Landed Cost (COGS + packaging + inbound + duty + handling realities)
Gross Margin Dollars (not just %)
Reorder Viability (lead time, MOQ, consistency, packaging pass rate)

If a supplier can’t talk me through these lines, I already know what happens next: surprises.

And surprises are expensive—because the profit you thought you had is the first thing to evaporate.

The two killers no one puts in the spec sheet: drift and damage

Most SKU failures don’t come from “bad design.” They come from:

1) Production drift
The sample is the promise. The shipment is the truth.
Without locked references (materials, surface finish, tolerance notes, QC checkpoints), tiny deviations stack up—especially across batches.

2) Transit damage
Fragile home décor doesn’t lose margin at the factory. It loses margin at the door.

This is why I care about packaging like it’s part of the product—because it is. And it’s also why I pay attention to how a supplier thinks about execution, not just aesthetics.

Coresight’s retail survey work has pointed to full-price sell-through pressure—one study cited an average 60% full-price sell-through among US non-grocery retailers, with inventory misjudgments commonly blocking full-price sales. Even if your category differs, the operating reality is the same: when things don’t sell cleanly, the margin pays the bill.

So when a supplier tells me, “Quality is fine,” I don’t hear reassurance.
I hear, “We don’t have a system.”

Reorder-ready isn’t a vibe. It’s a system you can audit.

This is where Teruier’s approach tends to feel different in practice.

Not because we claim magic—because we operate like a value translation layer between what buyers need and what factories actually execute.

A buyer says: “I need this to hold margin and not explode in returns.”
A factory hears: “Make it.”
A real coordination hub translates that into buildable reality:

finish callouts that don’t drift in mass production
QC checkpoints that match the failure modes (not generic inspection)
packaging that survives real transit, not showroom handling
a replenishment plan that fits your open-to-buy rhythm

And yes—our “craft hub” advantage matters here. When you’re sourcing from a production cluster with deep artisan capability and stable materials + process networks (the kind of ecosystem you find around Fuzhou’s craft manufacturing base), you can solve problems faster because the supply chain isn’t scattered—it’s interlocked.

That’s what buyers feel as “stable supplier.”
Under the hood, it’s a system.

The questions I ask suppliers (and the answers that win the PO)

If you want to speak buyer language, bring answers to these—proactively:

What’s the landed cost range, not just FOB? (and what assumptions are you using?)
What packaging pass standard do you build to for fragile décor?
Where does the SKU typically fail in production? (finish, alignment, glaze, welds, hardware?)
What are your QC checkpoints—before, during, and after packing?
What’s the lead time you can actually repeat—not the first-time promise?
What’s the MOQ that keeps the SKU profitable and reorderable?
What’s the “plan B” if a material or process constraint shows up mid-run?

If you can’t answer these, you’re not a reorder-ready supplier yet.
If you can, you’re not just selling a product—you’re selling reduced risk.

A copy-and-paste checklist for your next SKU review

Here’s a simple way to pressure-test any new home décor SKU:

Margin Fit: Target retail → planned promo → landed cost → target GM$
Damage Plan: packaging method + drop/impact risk thinking + spare parts policy (if relevant)
Consistency Plan: master reference + tolerance notes + batch control
Timeline Fit: production lead time + buffer + peak season reality
Reorder Fit: MOQ + repeatability + material stability
Story Fit: why this SKU wins a shelf (trend, function, giftability, set-building)
Exit Fit: if sell-through slows, how ugly does markdown get?