What margin structure and profitability metrics should a D2C spirits business target, and how do duty, delivery, VAT and advertising costs affect unit economics?

D2C spirits margins are tight once excise duty, delivery and product costs are factored in. Members emphasise that **profitability on first sale is essential**—don't rely on lifetime value given iOS attribution changes.

**Cost structure reality:** - Excise duty on 40% ABV spirits: ~£9 per bottle - Delivery: ~£5 per order - Product cost: variable, but leaves little room at £30 net sale price - VAT: applies on top and must be accounted for

**Profitability targets:** - **Minimum 50% gross margin** required for D2C to work - **ROAS (Return on Ad Spend) targets:** Members use 5.5× ROAS as a benchmark; pause spend if falling below target - Calculate ROAS across *all* D2C channels (not just Facebook), as Facebook attribution is unreliable post-iOS changes

**Strategic options:** - **Bundle duty-heavy spirits with merchandise** (lower-duty items, branded goods) to spread fixed costs and improve blended margins - Use a **ROAS calculator** to model scenarios before scaling ad spend - Be disciplined: pull back on advertising immediately if ROAS drops below your threshold

**Caveat:** One member with 100,000+ Shopify orders notes this is learnable, but requires in-house discipline or agency support to execute profitably. Don't assume repeat customers will save unprofitable first sales.