How do you work out contribution margin per order?

The lines, in order

Net revenue: the price paid after discount codes and bundles, without tax.

Minus fees: payment processing, marketplace or app fees charged per order.

Minus product cost: what you paid for the goods, including inbound freight and duties.

Minus fulfilment: pick and pack, packaging and inserts.

Minus shipping you pay: the carrier cost minus anything the customer paid for shipping.

Minus returns: refunds, return shipping and stock you cannot resell, spread across all orders.

A worked example

Here is an example with round numbers. A customer pays $80 after a discount. Fees are $3, the product cost $24, pick and pack $6, shipping you pay $8, and returns average $4 per order. Contribution is $35, a margin of about 44%.

Your figures will differ. The method is the same.

Before or after ad spend

Work it out before ad spend first. That number tells you how much you can afford to pay for an order and still make money. Then take away the ad cost per order to see what a campaign really earned.

If contribution before ads is $35 and you pay $40 in ads to win the order, you lose money on the first purchase. That can still be fine if the customer comes back, but only if you know they do.

Do it by product

One average for the whole store hides the problem. Work it out for each product, because some leave far more than others. A heavy product that ships expensively, or one that comes back often, can drag the average down while looking like a best seller.

Put the result on a profit card for each product and update it every month from your own books.