As discussed earlier, product and fulfillment costs are completely variable for Internet retailers employing a drop-shipping strategy.Thus, in line with our conceptualization in Section 3.2, product margin corresponds to the difference between the price charged for the SKU offered for sale and the cost the retailer paid to the supplier of the good. Similarly, S&H margin corresponds to the difference between the S&H fees charged to customers and the actual S&H costs paid to have products delivered to customer specified destinations.