How does MerchantSpring calculate contribution margin?

Contribution margin measures how much revenue remains after subtracting variable costs associated with generating a sale.

In MerchantSpring, contribution margin helps businesses understand how much income is available to cover fixed operating expenses after marketplace and operational costs have been deducted.

This metric is particularly useful for evaluating the profitability of advertising campaigns, promotions, and product pricing strategies.

Contribution Margin Formula

Contribution margin is typically calculated as:

Revenue
− Variable Costs
= Contribution Margin

Variable Costs Included

Variable costs may include:

• Amazon referral fees
• fulfilment fees
• advertising spend
• promotional discounts
• shipping costs
• cost of goods sold (if available)

These costs are directly tied to individual transactions.

Why Contribution Margin Is Useful

Contribution margin helps answer important questions such as:

• Are advertising campaigns generating profitable sales?
• How much margin remains after marketplace fees?
• Which products can support additional marketing investment?

Because contribution margin excludes fixed overhead costs, it provides a clearer view of transaction-level profitability.

How to Analyse Contribution Margin in MerchantSpring

1. Navigate to Reports → Profitability
2. Select the desired product or date range
3. Review the contribution margin metrics

This allows businesses to evaluate performance across products, channels, and marketing campaigns.

Notes: 

• Contribution margin focuses on variable costs rather than total operating expenses.
• Profit reporting may include additional costs depending on configuration.
• This metric is especially useful when analysing advertising performance.