CONTRIBUTION MARGIN
How to Calculate Ecommerce Contribution Margin
Contribution margin shows what remains after variable costs associated with an order or product are deducted from net revenue.
SHORT ANSWER
Start with the inputs you can verify
Contribution margin shows what remains after variable costs associated with an order or product are deducted from net revenue.
What the estimate means
Start from revenue after discounts, refunds, and taxes that are not revenue.
Include variable product, fulfilment, payment, marketplace, packaging, and shipping costs consistently.
Where estimates go wrong
Keep fixed overhead separate when using contribution margin to compare products or campaigns.
Keep the source measurements and assumptions with the result so another person can review or update the estimate later.
A practical workflow
- Define the order or product scope.
- Calculate net revenue and itemise variable costs.
- Subtract costs, divide by net revenue for a percentage, and document excluded overhead.