Ecommerce Contribution Margin Calculator
Calculate contribution margin per order, margin percentage, max allowable CAC, and break-even order volume from real ecommerce variable costs.
Enter your numbers
Order numbers
Costs per order
Your result
Contribution margin / order
$942.00
Contribution margin %
55.7%
Max allowable CAC
$942.00
Break-even order volume
64
Each order leaves $942.00 before fixed costs, which gives you room to test paid acquisition without relying on perfect ROAS.
Total contribution margin: $150,720.00
Rough ROAS floor: 1.80x
What Is Contribution Margin in Ecommerce?
Contribution margin is the money left from each order after subtracting the variable costs needed to sell and fulfill it.
Contribution Margin = Net Revenue - Variable Costs
Contribution Margin % = Contribution Margin / Net Revenue
For ecommerce, variable costs usually include cost of goods sold, shipping, payment fees, packaging, discounts, and expected refunds. Contribution margin matters because it shows how much room you have for customer acquisition, fixed costs, and profit.
Contribution Margin vs Gross Margin
Gross margin usually subtracts only cost of goods sold:
Gross Margin = (Revenue - COGS) / Revenue
Contribution margin goes further:
Contribution Margin = Revenue - COGS - Shipping - Fees - Packaging - Discounts - Refunds
That difference is important for paid acquisition. A product may look healthy on gross margin but leave much less room for CAC after shipping, fees, packaging, and refunds are included.
What This Calculator Shows
This ecommerce contribution margin calculator estimates:
- contribution margin per order
- contribution margin percentage
- total contribution at your order volume
- max allowable CAC before fixed costs
- break-even order volume
- implied ROAS floor
These numbers help you decide whether a product can support paid ads, whether your CAC target is realistic, and how many orders you need before fixed costs are covered.
Example Calculation
| Input | Value |
|---|---|
| Average order value | $180 |
| COGS | $52 |
| Shipping and fulfillment | $13 |
| Payment fees | $7 |
| Packaging | $2 |
| Discount rate | 4% |
| Refund rate | 2% |
After discounts and refunds, net revenue is about $169. Variable costs are $74, leaving about $95 in contribution margin per order.
That means the store has up to $95 available before fixed costs and profit. A sensible CAC target should be lower than that so the business is not spending the entire margin on acquisition.
What Good Contribution Margin Looks Like
| Contribution margin | What it usually means |
|---|---|
| Below 20% | Very little room for paid acquisition |
| 20% to 35% | Paid ads may work, but costs need close control |
| 35% to 55% | Healthy room for CAC and testing |
| Above 55% | Strong first-order economics |
These ranges are only a guide. The right margin depends on your category, fixed costs, repeat purchase rate, and growth goals.
How to Read Your Results
| Result | What it means |
|---|---|
| Contribution margin is low | AOV, pricing, shipping, or product costs may need work |
| Max CAC is low | Paid ads may be hard to scale profitably |
| Break-even order volume is high | Fixed costs require more sales volume |
| Implied ROAS floor is high | Campaigns need strong ROAS just to cover costs |
Common Mistakes to Avoid
- Using gross margin to set CAC targets
- Forgetting shipping, payment fees, packaging, discounts, or refunds
- Treating contribution margin as fixed when costs change often
- Scaling high-revenue products without checking margin quality
Frequently asked questions
What is contribution margin?
Contribution margin is the revenue left after subtracting all variable costs — COGS, shipping, payment fees, discounts, and refunds. It represents what each sale actually contributes toward fixed costs and profit. For ecommerce, it is a more accurate profitability measure than gross margin for pricing and acquisition decisions.
What is the difference between contribution margin and gross margin?
Gross margin is revenue minus cost of goods sold. Contribution margin goes further by subtracting all variable costs — shipping, payment processing fees, packaging, discounts, and returns. Contribution margin gives a more accurate picture of what each sale actually earns and how much room is left for customer acquisition.
What is a good contribution margin for ecommerce?
A contribution margin above 30% is generally healthy for ecommerce. Below 20%, there is usually insufficient room for paid acquisition, fixed costs, and profit. High-volume, low-margin businesses need strong repeat purchase rates to compensate for thin per-order margins.
How do you calculate contribution margin?
Contribution Margin = Revenue − COGS − Shipping − Payment Fees − Discounts − Refunds. Contribution margin percentage is (Contribution Margin ÷ Revenue) × 100. Calculating this per order — not just at a blended average — helps identify which products or channels are actually profitable.
What is max allowable CAC?
Max allowable CAC is the most you can spend acquiring a customer before consuming the entire contribution margin from their order. A practical CAC target should stay well below this ceiling to leave room for fixed costs and profit. Contribution margin and CAC targets should always be reviewed together.
Can a product with a positive contribution margin still be unprofitable?
Yes. A positive contribution margin means the product covers variable costs, but it may leave too little room for CAC and fixed overhead. If acquisition cost exceeds the available margin, each sale drives a net loss even though contribution margin is technically positive.
How does contribution margin connect to break-even ROAS?
Break-even ROAS is directly derived from contribution margin. If your contribution margin is 30%, your break-even ROAS is approximately 3.33x (1 ÷ 0.30). A higher contribution margin lowers the ROAS threshold you need to break even, giving paid acquisition more room to be profitable.
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Track contribution margin with live ecommerce data
Daymark connects Shopify and your ad platforms so margin, CAC, and ROAS targets stay grounded in current order data.