Margins
Gross margin vs contribution margin in ecommerce
Understand the difference between gross margin and contribution margin, when each metric is useful, and how optional variable costs fit after COGS.
Published: 2026-09-17 · Updated: 2026-09-17
Gross margin and contribution margin answer different questions. Gross margin shows what remains after product cost. Contribution margin shows what remains after product cost and selected variable costs that scale with orders.
Gross margin
Gross profit = net revenue − COGS Gross margin = gross profit ÷ net revenue
Net revenue equals gross sales minus discounts. StoreOpps operational reports emphasize gross profit and gross margin using this base.
Contribution margin
Contribution = gross profit − optional variable costs Contribution margin = contribution ÷ net revenue
Optional variable costs typically include payment fees, shipping and fulfillment subsidies, marketing and other per-order expenses you choose to subtract for a period view.
How they compare
- Gross margin uses only COGS — strong for catalog and supplier negotiations
- Contribution margin adds fulfillment and acquisition costs — closer to unit economics per order
- Both divide by net revenue, not gross sales
- Neither includes fixed rent, salaries or software that do not scale per unit
Numerical example
Same period, two views
- Gross sales: $100,000
- Discounts: $10,000
- Net revenue: $90,000
- COGS: $45,000
- Gross profit: $45,000 → gross margin 50%
- Variable costs: $20,000
- Contribution: $25,000 → contribution margin 27.8%
When to use each metric
Use gross margin when comparing products or evaluating price changes independent of this month's ad spend. Use contribution margin when judging campaigns, free-shipping thresholds or channels where fees and shipping vary per order. The StoreOpps profit calculator can show contribution margin when you enter optional costs; operational CSV reports today focus on gross profit and gross margin from net revenue and COGS.
Why they diverge
Heavy shipping subsidies, high card fees on low-ticket orders or aggressive paid acquisition can leave gross margin healthy while contribution margin is thin or negative on specific SKUs.
Common pitfalls
- Subtracting fixed costs as if they were variable
- Using gross sales in the denominator
- Ignoring changes in marketing intensity between periods
- Treating missing COGS as zero cost
Practical workflow
Start with gross margin by product to fix catalog economics, then layer variable costs for channel and campaign decisions.
Model gross and contribution margin with your own inputs.
Open the profit calculator