Hidden Costs Stealing Your Holiday Margins (And How to Stop Them)

For many product-based businesses, Q4 revenue paints a promising picture. 

But January’s profit-and-loss statement often tells a different story. That disconnect is no accident. It’s the result of five hidden costs that quietly erode margins long after the holiday rush is over.

In a recent webinar hosted by Cin7, experts from BELAY, Acro, and Cin7 unpacked the true cost of holiday sales. Their insights reveal one key theme: what you don’t track can absolutely hurt you. 

Let’s break down the five margin-killers — and how to fight back.

1. Returns and Reverse Logistics: The Quiet Profit Killer

Returns don’t just refund revenue. They generate complex costs:

• • Direct costs like restocking fees, reverse shipping, credit card fees, and warehouse labor.
  • Hidden costs like inventory obsolescence, unsellable goods, and poor customer experience.

As Brad Ebenhoeh of BELAY shared, many brands miscalculate the true cost of returns, especially when finance, operations, and warehouse teams operate in silos. 

Brands with year-over-year experience and strong data systems are better equipped to see (and reduce) these losses.

Takeaway: Treat returns as a data source, not a damage control issue. Use return insights to improve product listings, sizing, and inventory accuracy.

2. Freight and Shipping Surcharges: Delayed Costs, Immediate Damage

Shipping isn’t over when the product leaves the warehouse. 

Carrier surcharges, fuel fees, and express shipments can increase costs by 15–25%, often hitting weeks after delivery.

Brad recommends a post-season freight audit, not just to verify charges, but to inform better planning. Without real-time fulfillment data, brands can’t control costs on a per-order basis. 

As Jace Anderson of Acro put it —

"You need landed cost at checkout, not weeks later during reconciliation.”

Takeaway: Use integrated systems to pull real-time freight costs into pricing and planning. Don’t let delayed shipping costs surprise you in January.

3. Discounting and Margin Erosion: High Revenue ≠ High Profit

Heavy discounting may boost topline revenue, but it often hides margin loss. 

Many brands track revenue lift during Black Friday and Cyber Monday without understanding how those discounts cut into actual profits.

The best approach? 

Build channel-specific P&Ls that include:

• • Accurate, accrual-based COGS
  • Discounting impact
  • Customer acquisition cost vs. lifetime value

Bundling slow-moving SKUs or using timed/tiered discounts can preserve margin while still creating urgency.

Takeaway: Discount with purpose. Know your goal — clearing inventory, acquiring new customers, or increasing repeat purchases — and measure against it.

4. Tariffs and Import Costs: Small Oversights, Big Impact

Tariffs can add 10–25% to landed cost, depending on category. 

Many businesses forget to immediately update COGS or pricing after a tariff change, leading to losses, especially across multiple sales channels.

Without clean data flowing between finance and operations, teams are flying blind. 

Jace emphasized the need for a single source of truth — 

“If your cost basis isn’t updated, you’re effectively selling at a legacy price.”

Takeaway: Keep landed costs current. Audit tariff impact regularly and ensure your pricing adjusts in real time.

5. Overstock and Carrying Costs: Inventory Tied Up, Budgets Strained

Inventory that doesn’t sell quickly becomes expensive. Brad broke down carrying costs into three budget drains:

• • Finance: Tied-up working capital and skewed cash flow
  • Operations: Increased warehousing, storage, and labor costs
  • Marketing: More effort promoting C-list SKUs instead of high-margin products

Forecasting can help, but only with visibility across channels. 

With tools like Cin7’s Foresight AI, brands can spot trends, predict demand by location, and adjust in real time.

Takeaway: Segment inventory by A/B/C priority. Use forecasting to avoid overstock—and apply learnings to next year’s holiday plan.

Final Thought: The Cost of Not Knowing

From reverse logistics to tariff delays, these five costs rarely appear on your Q4 scoreboard—but they will show up in January’s bottom line.

The fix? Integrated data, clean processes, and aligned teams. Whether you’re planning for next season or auditing this one, visibility is your greatest asset.

Let the numbers guide your next move, not emotion.

See how BELAY can help  👉 here.