Contribution margin
Definition
Contribution margin is revenue minus all variable costs — cost of goods, shipping, payment fees, returns and marketing — showing what each sale actually contributes toward fixed costs and profit.
For e-commerce in particular, contribution margin is the only honest scoreboard. Revenue growth with negative contribution margin is a business buying customers at a loss, and no amount of ROAS improvement fixes it.
In the UAE the calculation needs two locally significant deductions: cash-on-delivery failure rates and return rates, both of which can be materially higher than in Western benchmarks and both of which are usually omitted from marketing reporting.
Contribution margin = Revenue − COGS − shipping − payment fees − returns − marketing
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