What is contribution margin?

Contribution margin is revenue minus all variable costs per order — COGS, shipping, payment fees, returns, and ad spend. It shows what each order actually contributes toward covering fixed costs and profit.

What's the difference between contribution margin and profit margin?

Contribution margin tells you what each order contributes AFTER variable costs (COGS, shipping, payment fees, returns, ad spend) — but BEFORE fixed costs like rent, salaries, and software. Profit margin includes everything. Contribution margin is the right lens for decisions like 'Can I afford another order?' — every positive contribution dollar helps cover your fixed costs.

Why include ad spend in contribution margin?

Ad spend per order is a variable cost — it scales directly with each order you acquire. Including it gives you a true 'unit economics' view. A $50 contribution before ads means nothing if you spent $60 acquiring that order.

What's a healthy contribution margin percentage?

This calculator judges every store against one global band: below 0% is negative, under 20% is thin, 20–35% is healthy and 35%+ is strong. Your own vertical shifts the target — apparel 30–45%, beauty 40–55%, food and beverage 20–30%, electronics 15–25% — so read the band as a floor, not a grade. Below 20% leaves little room for operational overhead, seasonality, or a spike in returns.

My contribution margin is negative. What should I do immediately?

Stop scaling spend on that product (SKU). Investigate whether your cost of goods sold (COGS) has crept up, shipping costs have changed, or returns rate has spiked. Often a single underpriced SKU drags the blended number down. Consider price increases (5–15%) or dropping the worst SKUs before anything else.

How accurate are these calculations?

Our calculators use industry-standard formulas and are designed for directional accuracy. Results depend on the quality of your input data. For precise financial planning, we recommend validating results with your accountant or financial team.

Is this really free? What's the catch?

Yes, completely free with no hidden costs. We offer these tools to help ecommerce brands succeed. We may occasionally share relevant insights via email if you opt in, but the tools remain free forever.

Is my data private and secure?

Your calculations run in your browser, and we don't store the numbers you type unless you choose to send them — by unlocking a benchmark, emailing yourself a report, or contributing an anonymous data point. We do record anonymous usage events, which tool was used rather than what you entered. The AI tools work differently: your store URL and the report or concepts we generate are saved so we can support you and so your share link keeps working. We never access your Shopify admin, your customer data, or any private account information.