Contribution margin

Definition

What is left of an order after product, shipping, fees, and the ad spend that won it.

Why It Matters

Gross margin on a listing tells you almost nothing, because the cost of getting the order is the cost that moves. A store whose advertising has crept from a tenth of revenue to a quarter has already lost most of its profit while the top line kept growing. Ask for contribution margin by product and by channel over twenty-four months, and ask what the return rate does to it, since returns arrive after the ad has been paid for.