Contribution margin calculator: CM1, CM2 and CM3.
One margin number tells you whether last month worked. Three tell you why. CM1 asks whether the product pays, CM2 whether the order pays, CM3 whether the customer pays — and the gap between them is where the answer lives. Enter a month and read the ladder.
What the marketplace dashboard shows, GST included.
Share of orders that come back. Taken off revenue, not added as a cost.
GST included, same basis as gross revenue. Converts per-order costs into monthly ones.
Landed product cost. Nothing else belongs at this level.
Forward shipping, picking, packing. Charged on every order dispatched.
Reverse freight, inspection, restocking. Only on the ones that come back.
Commission plus payment and collection fees, blended.
Ads, agency, influencers, coupons — everything spent to find the order.
Rent, salaries, software. Not a contribution margin — it does not move when you ship one more parcel.
19.83%
Enough to cover overhead and reinvest, provided volume holds.
Revenue bridge
The ladder
Below the ladder
Per order
Marketplace fees are entered as one blended percentage of net revenue. Every marketplace slices commission, collection and closing fees differently, so a monthly ladder is the right altitude for this — use the settlement calculators when you need a specific order priced to the rupee.
How it is worked out.
CM1 = net revenue − COGS · CM2 = CM1 − logistics − fees · CM3 = CM2 − marketing
- Net revenue
- Gross, less returns, less GST. Every percentage on this page divides by this figure and never by gross — divide by gross and the GST rate quietly moves your margins, so a 5% product looks healthier than an 18% one on identical economics.
- CM1 — does the product pay?
- Net revenue less landed product cost, and nothing else. No fees, no shipping. If CM1 is thin, no amount of operational cleverness downstream rescues the item.
- CM2 — does the order pay?
- CM1 less the cost of actually fulfilling it: forward logistics on every parcel dispatched, the reverse leg on the ones that come back, and marketplace commission and payment fees.
- CM3 — does the customer pay?
- CM2 less marketing. This is the rung that decides whether growth funds itself, because it is the first one that includes what you paid to find the order.
- EBITDA
- CM3 less overhead. Not a contribution margin — rent does not change when you ship one more parcel — but it is the number that says whether the business works rather than the unit.
Some Amazon tooling folds referral and fulfilment fees into CM1 and pushes returns down to CM3. This page does not: a referral fee is a cost of taking an order, not a property of the product, and folding it upward destroys the only question CM1 exists to answer.
With real numbers.
A ₹10,00,000 month on an Indian marketplace. 18% GST, a 10% return rate, ₹1,000 average order value. Product costs 35% of net revenue, logistics ₹80 an order with ₹120 more on each return, blended fees 20% of net, ₹1,00,000 on ads and ₹1,50,000 of overhead.
| Gross revenue | ₹10,00,000 |
|---|---|
| Less returns (10%) | ₹1,00,000 |
| Less GST (18%) | ₹1,37,288 |
| Net revenue | ₹7,62,712 |
| Less COGS (35% of net) | ₹2,66,949 |
| CM1 | ₹4,95,763 · 65.00% |
| Less logistics (1,000 orders × ₹80) | ₹80,000 |
| Less return handling (100 × ₹120) | ₹12,000 |
| Less marketplace fees (20% of net) | ₹1,52,542 |
| CM2 | ₹2,51,220 · 32.94% |
| Less marketing | ₹1,00,000 |
| CM3 | ₹1,51,220 · 19.83% |
| Less overhead | ₹1,50,000 |
| EBITDA | ₹1,220 · 0.16% |
CM3 = ₹1,51,220 ÷ ₹7,62,712 = 19.83% of net revenue
19.83% CM3 is a perfectly respectable number, and this business made ₹1,220 last month. That is the whole argument for reading three margins instead of one: nothing in CM3 is wrong, and nothing in CM3 knows about the ₹1,50,000 of overhead sitting underneath it. Read the rungs together or the healthy one flatters the broken one.
What the number means.
CM3 is the rung to watch, because it is the first that counts what you paid to find the order. Bands below are for a marketplace or D2C brand selling physical goods in India.
| Range | Verdict | What it means |
|---|---|---|
| Below 0% | Loss | Every order makes the hole deeper. More volume is more loss. The fix is upstream in CM1 or CM2 — never in ad spend. |
| 0–10% | Thin | There is contribution, but not enough to absorb a fee revision, a bad returns month, or the overhead that arrives with growth. Most brands that feel busy and broke live here. |
| 10–20% | Workable | Enough to cover overhead and reinvest, provided volume holds. This is where a healthy marketplace business usually sits. |
| 20% and above | Strong | Growth can be funded out of contribution rather than out of capital. Worth checking CM1 is not doing all the work through a price that competitors will undercut. |
Read the gaps, not just the levels. A high CM1 with a weak CM2 is an operations problem — fees, shipping, returns. A healthy CM2 that collapses at CM3 is an acquisition problem, and no listing change will fix it.
Where this goes wrong.
- 01
Dividing by gross revenue instead of net
GST and returns are not margin. Divide by gross and a seller on 5% GST appears more profitable than one on 18% at identical economics, and neither number can be compared to anyone else's.
- 02
Treating CM3 as profit
CM3 is what is left before rent, salaries and software. The worked example above shows 19.83% CM3 and ₹1,220 of actual earnings. Contribution margin is a measure of the unit, not the business.
- 03
Putting marketplace fees into CM1
It makes CM1 useless. CM1 exists to answer whether the item is viable before anyone is paid to move or sell it — fold in a referral fee and you can no longer tell a bad product from an expensive channel.
- 04
Charging logistics only on delivered orders
A returned order was still picked, packed and shipped. Costing only the ones that stuck makes a high return rate look cheaper than it is, which is exactly backwards.
- 05
Netting returns off as a cost rather than off revenue
A return is revenue that never existed, plus a handling cost. Booking the whole order value as a cost double-counts it and understates every margin below.
The rest of the set.
Where the real numbers live.
- Flipkart Profit & Loss
The same ladder, built from your actual monthly export rather than typed in — every fee named and attributed.
- Amazon Business Report (By ASIN)
CM1 is a product question. This is where you find which products are answering it badly.
- Amazon profit analytics
What we build for the profit side of an Amazon account, beyond the calculators.
See this ladder built from your actual exports
The calculator takes a month you type in. The Flipkart P&L and Amazon Business modules build the same ladder from the reports themselves, per SKU, with the leakage attributed.
Questions people actually ask.
What is the difference between CM1, CM2 and CM3?
Each strips away a different kind of cost. CM1 is net revenue less product cost, and answers whether the item is viable at all. CM2 also removes what it costs to fulfil an order — logistics, returns handling, marketplace fees — and answers whether the order is worth taking. CM3 also removes marketing, and answers whether the customer was worth acquiring.
Should marketplace fees go in CM1 or CM2?
CM2. A referral or commission fee is a cost of taking an order through a particular channel, not a property of the product. Some Amazon-specific tools put fees in CM1; the cost of doing so is that CM1 stops being able to tell you whether the product itself works, which is the only job it has.
Is CM3 the same as net profit?
No. CM3 excludes overhead — rent, salaries, software, retainers — because those do not change when you ship one more parcel. Subtract overhead from CM3 and you get EBITDA, which is much closer to what the business actually earned.
What is a good CM3 for an Indian marketplace seller?
Between 10% and 20% of net revenue is workable for physical goods, and above 20% means growth can be funded out of contribution rather than capital. Below 10% the business is usually one fee revision or one bad returns month away from trouble.
Why divide by net revenue rather than gross?
Because GST and returns are not margin. Dividing by gross lets the tax rate move your margins: a 5% GST product would look healthier than an 18% one on identical unit economics, and no two brands' numbers would be comparable.
Does this work for Flipkart and Myntra as well as Amazon?
Yes. The ladder is identical on any marketplace and on your own storefront — only the fee percentage changes. Enter your blended commission and payment fees as a share of net revenue and the arithmetic is the same.
How do I handle returns in the ladder?
Returns come off revenue first, before GST, because a returned order is revenue that never existed. The extra cost of the return itself — reverse freight, inspection, restocking — is a separate per-return figure that lands in CM2.