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What does an order actually leave behind?
Gross margin is where every other calculator stops. This one keeps going through card fees, pick and pack, shipping, a provision for returns and the advertising attributed to the order — to contribution, which is the number that decides whether one more sale helps.
Gross margin versus contribution
Gross margin is (price − cost of goods) ÷ price. Contribution is what remains after every variable cost of serving that order: goods, payment fees, fulfilment, a returns provision and attributed advertising. Gross margin tells you what the product is worth; contribution tells you what the order earned. On most ecommerce catalogues the gap between the two is larger than the profit.
One order, all the way down.
Prefilled with an illustrative product whose gross margin looks fine. Replace it with one of yours — ideally your best seller, since that is the one carrying the catalogue.
Contribution per order
$15.00
22.1% of order value — against a gross margin of 68.5%.
- Order valuegoods only $68.00
- Cost of goodsunit cost, inbound freight and duty -$21.40
- Payment feescard rate, fixed fee and platform surcharge -$2.27
- Fulfilmentpick, pack, materials and outbound shipping -$9.60
- Returns provisionspread across every order, not only the returned one -$1.73
- Advertisingblended cost attributed to the order -$18.00
- Gross marginwhere other calculators stop
- $46.60
- Contribution before adswhat advertising has to come out of
- $33.00
- Breakeven ROASorder value ÷ contribution before ads
- 2.06×
- Returns provisioncarried by every order
- $1.73
The four costs that are not on the invoice
Cost of goods arrives as a bill, so nobody forgets it. These do not.
- Payment fees Two to three percent of revenue plus a fixed fee per order, and more again on a third-party gateway. At a low order value the fixed fee alone can be another two percent — see the fee calculator.
- Outbound shipping you subsidise Free shipping is not free; it is a line in this calculator. If you charge nothing and it costs $7.40, that is $7.40 of contribution gone on every order.
- The returns provision Modelled properly it is carried by every order, not only the returned one, and it includes the fulfilment already spent and the card fee you do not get back.
- Blended advertising Attributing it per order turns an abstract monthly number into the thing that decides whether the order was worth having. Set it to zero to see contribution before advertising, which is what your breakeven ROAS is built on.
How the returns provision works
The line most models get wrong, and the reason a healthy gross margin can produce no profit.
| Component | Why it is lost |
|---|---|
| Unrecovered goods | The share of the item you cannot resell. Zero for opened consumables, high for apparel. |
| Original fulfilment | Pick, pack and outbound shipping were spent before anyone knew it was coming back. |
| Payment fees | The percentage fee is generally not refunded when you refund the customer. |
| Return shipping and handling | Not modelled separately here — fold it into the recovery percentage if you pay it. |
That total is multiplied by your return rate and carried by every order, which is what makes it a provision rather than an event. No benchmark return rate or margin appears on this page — category variance makes cross-brand averages misleading and we have not measured one. metric to confirm. Reviewed 2026-09-09.
What this leaves out
Fixed costs. Rent, salaries, software and everything else that does not change when you sell one more unit. Contribution is what has to cover them, which is why it is the right per-order number and the wrong whole-business number.
Discounting. If a meaningful share of orders carry a code, your realised price is below list. Run this again at the discounted price to see what the promotion actually costs.
Multi-item baskets. This models one unit. A two-item order usually earns more contribution than two single-item orders, because shipping and the fixed card fee are paid once — which is exactly the argument for the post-purchase offer.
Cash timing. Contribution is not cash. Inventory is paid for months before it sells, and that gap is a different problem this page does not model.
Definitions
- COGS
- Cost of goods sold — the landed cost of the product itself, including inbound freight and duty.
- Gross margin
- (Price − COGS) ÷ price. A property of the product, not of the order.
- Contribution
- What remains after every variable cost of serving the order. What fixed costs are paid from.
- Returns provision
- The expected cost of returns, spread across all orders rather than charged to the returned one.
- Breakeven ROAS
- The return on ad spend at which contribution reaches zero. Derived from your economics, not a target.
Questions about margin
How do I calculate profit margin on Shopify?
Gross margin is (price − cost of goods) ÷ price, and it is the number most calculators stop at. It is not what the order leaves behind. Subtract payment fees, pick and pack, outbound shipping, a provision for returns and the advertising attributed to the order, and what remains is contribution — the only figure that tells you whether selling one more unit makes you money.
Why is my contribution so much lower than my gross margin?
Because four costs sit between them and each is individually easy to ignore. On the worked example above, a 69% gross margin becomes single-digit contribution once shipping, card fees, a returns provision and blended ad cost are taken out. None of those lines is unusual; they are simply not on the invoice, so they do not feel like cost of goods.
How should returns be modelled?
As a provision spread across every order, not a cost that lands only on the returned one. If 7% of orders come back and you resell 40% of the item's value, then every order carries 7% of the unrecovered goods, the fulfilment you already paid, and the card fee you do not get back. Modelling returns only against returned orders is the most common way a margin model flatters a business.
What is breakeven ROAS?
The return on ad spend at which an order contributes exactly zero. It falls out of your own numbers — order value divided by contribution before advertising — rather than being a target somebody hands you. Below it you are buying revenue at a loss; the useful question is how far above it you need to be to cover fixed costs.
Do you publish benchmark margins by category?
No. A supplement brand at 78% gross margin and a furniture brand at 34% are both perfectly healthy, so a cross-brand average would mislead more than it informs, and we have not measured one. Compare this month against last month on the same product instead.
Should I include fixed costs?
Not here. This is contribution per order — the marginal economics of selling one more unit. Rent, salaries and software are real but they do not change when you sell one more, so they belong in a P&L rather than in a per-order model. Contribution is what has to cover them.
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