Contribution margin calculator for ecommerce
Contribution margin = order value − product cost − shipping − packaging − payment fees − discounts − returns. Divide by order value for the %. A $100 order with $50 of those costs keeps $50, a 50% margin, and breaks even on ads at a 2.0 ROAS.
- Order value$100.00
- Product−$30.00
- Shipping−$8.00
- Packaging−$2.00
- Payment fees−$3.00
- Discounts−$4.00
- Returns−$3.00
- Before ads$50.00
- Ads−$25.00
- After ads$25.00
Contribution margin formula, per order.
Order value − variable costs
Variable costs come with every order: product, shipping, packaging, fees, discounts, returns.
Contribution ÷ order value
The share of each order left for ads, fixed costs and profit.
1 ÷ contribution margin %
At 50% that is 2.0. Below it, ads cost more than orders keep.
Contribution − ad cost per order
What a paid order leaves for team, rent, software and profit.
Contribution vs gross vs net margin.
| Margin | Subtracts from sales | $100 order |
|---|---|---|
| Gross | Product cost | 70% |
| Contribution | Product, shipping, packaging, fees, discounts, returns | 50% |
| Net | All of the above, plus ads and fixed costs | 10% |
Demo Brand: $100 in, $50 kept.
Demo Brand is a made-up Shopify store with round numbers, the same one as in What is a good ROAS?
- Average order value
- $100
- Product cost
- −$30
- Shipping and packaging
- −$10
- Payment fees
- −$3
- Discounts and returns
- −$7
- Contribution before ads
- $50 (50%)
Break-even ROAS = 1 ÷ 0.50 = 2.0. At $25 of ads per order, $25 is left: 25%. On 2,000 orders a month with $30,000 of fixed costs, net profit is $20,000, a 10% net margin.
