Unit economics (hardware)

For a hardware product, unit economics start with the price actually received (after discounts, channel margins and payment fees), subtract the landed cost of goods, then subtract the variable costs of selling and supporting that unit: fulfillment, shipping to the customer, returns, warranty repairs and any per-unit cloud or connectivity costs over the product's life. What remains is the contribution margin, the amount each unit contributes toward fixed costs such as engineering, tooling and overhead.

Connected products complicate this. A device sold once that incurs cloud, cellular and support costs for years can turn unprofitable unless a subscription or service covers those costs.