Cost Efficiency Initiative

1. Project Snapshot

A mid-market cosmetics e-commerce brand increased profit margins by 34% in under 10 months by systematically cutting unnecessary costs, optimizing ad spend, and building operational automation across fulfillment, marketing, and retention.

2. Client Background

“Lunaria Beauty” is a beauty DTC brand with a strong social media following, moderate repeat customer base, and a wide SKU range spanning skincare, makeup, and fragrance.

The Challenge: They faced rising operational costs, increasingly unprofitable ad campaigns, and ballooning inventory waste. Yet their product demand was solid, and LTV potential high—if efficiency could be engineered into their business.

3. The Challenge: Profitless Growth

While the brand had strong product demand and high LTV potential, they faced several critical efficiency issues:

• ROAS Deterioration: Meta and Google ad costs surged while CAC outpaced LTV
• Warehouse Inefficiencies: Pick & pack inefficiencies led to growing fulfillment costs
• Margin Erosion: Free shipping policies were eroding margins without increasing AOV
• Poor Campaign Performance: Email/SMS campaigns had high volume but low engagement and poor segmentation
• Inventory Waste: Overstocked SKUs led to capital freeze and heavy discounting

4. Our Four-Pillar Optimization Strategy

We implemented a comprehensive strategy to transform their business from reactive to data-driven efficiency.

Pillar 1: Marketing Spend Restructuring

We restructured their marketing approach to focus on profitable customer acquisition.

Channel-Specific CAC Caps: Introduced channel-specific CAC caps based on LTV quartiles to ensure profitable customer acquisition across all channels.

Audience Optimization: Replaced interest-based Facebook audiences with lookalikes modeled on high-margin customers for better targeting efficiency.

Content Strategy Shift: Cut underperforming influencer spend and doubled down on UGC content with pixel-retargeting and attribution tracking.

Attribution Improvements: Built new attribution windows in Triple Whale and GA4 to reduce double-counted conversions and improve campaign measurement.

Pillar 2: Fulfillment & Inventory Efficiency

We optimized their operational processes to reduce costs and improve inventory management.

SKU-Level Forecasting: Used Shopify + Cogsy to run SKU-level inventory velocity forecasting for better demand planning.

ABC Analysis: Implemented ABC analysis to determine top 20% revenue-driving SKUs and optimize inventory allocation.

Pre-Order Strategy: Moved non-core SKUs to pre-order or limited-run drops to eliminate dead stock and reduce inventory waste.

3PL Optimization: Contracted a 3PL with SLA guarantees and smarter pick-pack batching to reduce per-order handling costs by 22%.

Pillar 3: Lifecycle Automation & Segmentation

We built intelligent automation systems to improve customer retention and lifetime value.

Platform Migration: Migrated to Klaviyo + Recharge for smarter replenishment flows and better customer lifecycle management.

Lifecycle Segmentation: Created lifecycle segments: First-time, Loyal, At-risk, High AOV—each with its own copy and CTA logic for personalized communication.

Win-Back Automation: Automated win-back series triggered at 45, 75, and 120-day dormancy, offering personalized bundles (not discounts) to re-engage customers.

SMS Replenishment: Introduced replenishment prompts via SMS based on consumption cycles (e.g., serum usage every 28–35 days) to drive repeat purchases.

Pillar 4: Profit-First Promotions & Merchandising

We shifted from discount-driven promotions to margin-optimized strategies.

Margin-Tiered Offers: Moved from sitewide sales to margin-tiered offers (e.g., bundles on high-margin items, gifts with purchase on slow movers).

Custom Kits: Created “build-your-own” kits at slightly higher AOV but better margin stacking to improve profitability.

Merchandising Intelligence: Displayed contribution margin per product in Shopify backend to guide merchandising priorities and focus on high-margin items.

5. Results

The four-pillar optimization strategy delivered transformative results within 10 months:

• 34% Increase in Profit Margins: Significant improvement in overall business profitability
• 27% Reduction in Ad CAC: Achieved without loss in new customers through better targeting and attribution
• 41% Improvement in Inventory Turnover: Year-over-year improvement in inventory efficiency
• 62% Increase in Email Revenue per Send: Dramatic improvement from new segmentation and automation
• 22% Reduction in Warehouse Cost per Order: Operational efficiency gains through 3PL optimization

6. Key Learnings

• You can’t optimize what you don’t track: SKU-level profitability and customer segment performance must be visible
• Segmented retention beats batch & blast: Lifecycle-based flows drastically increase LTV
• Pre-orders reduce inventory waste while building demand tension: Especially effective for seasonal or experimental SKUs
• Focus on contribution margin, not just top-line revenue: It’s the best lens for growth-stage e-commerce

7. Future Enhancements

• Launch AI-powered inventory reordering tied to marketing campaigns
• Expand cross-channel attribution with post-purchase surveys and Triple Whale multi-touch modeling
• Introduce refill subscriptions for high-frequency skincare products
• Implement predictive analytics for demand forecasting and inventory optimization

8. Tech Stack & Tools Used

• Marketing Automation: Klaviyo, Postscript, Recharge
• Analytics & Attribution: GA4, Triple Whale, Shopify Analytics
• Operations & Inventory: Cogsy, ShipBob, Airtable
• Creative & Merchandising: Canva Pro, Motion, Figma
• E-commerce Platform: Shopify (inventory management and order processing)

9. Conclusion & Strategic Takeaways

Lunaria Beauty’s shift from reactive promotions to data-driven cost efficiency changed its economics from fragile to scalable. By aligning every part of the business—marketing, operations, lifecycle marketing, and product strategy—to contribution margin, the brand built sustainable profitability without sacrificing growth.

The key insight is that e-commerce efficiency requires a holistic approach that goes beyond simple cost-cutting. By implementing intelligent automation, data-driven decision making, and customer-centric strategies, brands can achieve both growth and profitability simultaneously.

This case study serves as a tactical blueprint for e-commerce operators looking to cut waste, stretch ad dollars, and create a retention machine without becoming discount dependent. The four-pillar approach demonstrates that systematic optimization across all business functions can transform a struggling brand into a profitable, scalable operation.