Article

What Is Contribution Margin? Definition and Guide

Shopify · shopify.com Free Beginner

The cleanest plain-English starting point from the platform most Indian D2C brands actually run on. It nails the core idea - contribution margin is what's left after the variable costs of selling one more unit - and gives you the formula before you get lost in CM1/CM2/CM3 jargon.

• Contribution margin = revenue minus the variable costs of producing and selling a unit.
• It tells you how much each sale contributes to fixed costs and profit, unlike a flat gross-margin number.
• Use it per product and per SKU to see which items actually make money at scale.