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Shopify Margin Estimator

The Shopify Margin Estimator calculates gross margin and contribution margin for a product after accounting for cost of goods, payment fees, fulfillment, shipping subsidies, and other variable costs. It gives merchants a more useful view than simply subtracting product cost from selling price.

The output can support pricing decisions, campaign planning, and product comparisons. By separating gross profit from contribution profit, the estimator shows how much revenue remains after the costs that change with each order, before fixed overhead such as salaries, software subscriptions, or rent.

Unit economics

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Result
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Contribution margin
Gross profit—
Gross margin—
Contribution profit—
Total variable cost—

1. Enter the selling price
Use the amount collected for one unit before taxes that are passed through.

2. Add product cost
Include landed cost when available, not just the supplier invoice.

3. Enter payment charges
Use the percentage and fixed fee applicable to the transaction.

4. Include fulfillment costs
Add pick-and-pack, packaging, shipping subsidy, and other per-order expenses.

5. Compare both margins
Gross margin measures price minus product cost; contribution margin includes the additional variable costs.

Formulas:

Gross margin % = (Selling price − Product cost) ÷ Selling price × 100
Contribution margin % = (Selling price − Total variable cost) ÷ Selling price × 100

Total variable cost includes product cost, payment fees, fulfillment, merchant-paid shipping, and other variable expenses.

What the result means

Contribution margin is the share of each sale available to cover fixed costs and profit.

The estimate excludes fixed overhead, income tax, returns, and advertising unless those are entered as variable costs.

Given: Selling price $65, product cost $22, payment fee 2.9% + $0.30, fulfillment $4.50, merchant-paid shipping $6, and other variable cost $1.20.

Calculation: Payment fee = $65 × 2.9% + $0.30 = $2.19. Total variable cost = $22 + $2.19 + $4.50 + $6 + $1.20 = $35.89. Contribution profit = $65 − $35.89 = $29.11. Contribution margin = $29.11 ÷ $65 × 100 = 44.78%.

Result: Contribution margin = 44.78%.

About 44.78 cents of each sales dollar remains for fixed costs and profit.

What is the difference between gross and contribution margin?

Gross margin subtracts only product cost. Contribution margin also subtracts other costs that rise with each order, making it more useful for campaign and pricing decisions.

Should advertising cost be included?

Include it only when you want a post-acquisition contribution margin and can assign a reliable cost per order. Otherwise evaluate advertising separately.

Do I include sales tax in the selling price?

Usually no, when tax is collected from the customer and remitted to authorities. Use net merchandise revenue for a cleaner operating margin.

What happens if contribution margin is negative?

The entered variable costs exceed the selling price. Each additional sale would reduce cash contribution before fixed expenses.

Can I compare products with different prices?

Yes. Contribution margin percentage supports comparison, while contribution profit shows the actual dollars produced by one sale.