Selling socks math. Does 4 - 2 = 3 - 1?

Google LLM November 12th 2026 

At an equal inventory turnover rate, 3 − 1 is significantly more profitable than 4 − 2. While both scenarios yield the exact same absolute profit of 2 per unit sold, the second scenario achieves a higher gross profit margin and requires half the capital investment.

Profitability Breakdown

Metric	Scenario A (4 − 2)	Scenario B (3 − 1)
Selling Price (Revenue)	4	3
Cost of Goods Sold (COGS)	2	1
Gross Profit per Unit	2	2
Gross Profit Margin	50.00%	66.67%
Return on Inventory (ROI)	100%	200%

Why 3 − 1 Wins in Retail

• Higher Gross Margin. Scenario B converts 66.67% of its revenue into gross profit compared to 50.00% for Scenario A. Higher margins provide a much stronger buffer to cover fixed operating expenses like rent, payroll, and marketing.
• Superior Capital Efficiency. Because the wholesale cost is 1 instead of 2, you tie up 50% less cash in inventory to generate the exact same gross profit of 2 per item.
• Better Cash Flow Generation. With the same sales volume and turnover speed, Scenario B frees up working capital that can be reinvested to double your unit volume, potentially doubling your total profit.

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Ansgar "John" Brenninkmeijer would argue that both scenarios are equally profitable in terms of pure merchandising value. He famously advocates for "rekenen in centen" (counting in cents/contribution dollars) rather than percentages, meaning he considers the 50% vs. 66.67% margin difference largely irrelevant. [1, 2, 3]

In his book, Breakthrough: C&A's Secret Formula Rediscovered (and its Dutch version, Rekenen in centen), Brenninkmeijer explains how C&A historically dominated retail by rejecting conventional gross margin percentages. [1, 2]

How He Would View 4 − 2 = 3 − 1

• Percentages Don't Pay the Bills. Brenninkmeijer states that "percentages without absolute values are mostly meaningless". Whether a product yields a 50% margin (4 − 2) or a 66.67% margin (3 − 1), both put the exact same 2 in the cash register to cover fixed store costs like rent and staff. [1, 2]
• Equal Contribution per Unit. Assuming equal sales velocity (turnover speed), both items generate the exact same contribution margin (Deckungsbeitrag) per unit of shelf space and time. To him, preferring 3 − 1 simply because its percentage looks higher is the exact trap conventional retailers fall into. [1, 2, 3]
• The "Snowball" Exception. While he views the immediate profit of 4 − 2 and 3 − 1 as equal at identical turnover speeds, he would point out that lowering a price from 4 to 3 (or taking a smaller percentage markup) is usually done to trigger higher sales volume—a strategy he calls C&A's historical "snowball system". [1]
• The Only Tie-Breaker (Capital Cost). As a value investor and co-founder of ValueMachinesFund, he would only favor 3 − 1 if inventory financing costs were high, since tying up 1 instead of 2 requires less working capital to generate that same contribution of 2. [1]

The Core Formula

Contribution = (Selling Price - Purchase Price) x Units Sold