Contribution Margin

Contribution margin is the amount left after subtracting variable costs from order revenue. For ecommerce sellers, those variable costs often include product cost, marketplace fees, payment fees, shipping, advertising cost, return reserve, packaging, and tax reserves.

Why it matters

A product can look profitable at gross margin level but become weak after advertising or returns. Contribution margin keeps the focus on the money left from each order before fixed overhead.

How to use it

Start with a marketplace calculator such as the Amazon FBA profit calculator, then test higher ad cost and return reserve assumptions. If contribution margin stays healthy, the product is more resilient.

Use it in a calculator

After reviewing this term, open the marketplace calculator hub or country calculator hub and test the number with a realistic product scenario.