GuideThe numbers leadership asks about
Contribution margin per order
Definition
What one order leaves behind once the cost of goods, shipping, payment fees and returns are paid. It is the base layer under every other number in this dictionary.
How it’s calculated
Start from what the customer paid after discounts. Subtract cost of goods, shipping, payment fees, and the cost of returns averaged across all orders. What remains is what an order contributes towards fixed costs and profit. The two lines most often left out are returns and discounting; a model built on list price with a zero return rate sits above reality by exactly those lines. The margin sets your break-even MER, the revenue-to-marketing-spend ratio at which ads stop losing money: one divided by contribution margin as a share of revenue. At a 40% margin it is 2.5. A ROAS computed on revenue flatters a low-margin business; so does an LTV built the same way.
What to watch for
Ask what return rate the model carries, then ask finance what the return rate was; the gap between the two is margin that exists only in the spreadsheet. Check whether the revenue line is list price or what customers paid after discount codes. Compare the margin of what the ads sold last month with the company average, because a blended margin misprices ad-driven orders whenever the mix differs. And check the ROAS target: a single target across products with different margins pays for low-margin growth at the same rate as the high-margin kind.
The question you ask
“What does an average order leave us after goods, shipping, fees, returns and discounts?”