We hear the same sentence a lot: revenue looks better than last year, but nothing is left. Sales climb on the dashboard and the bank account does not agree. Most brands seeing this for the first time go looking at their prices. That is rarely where it is.
Margin on a marketplace does not disappear in one line item. Commission, shipping, returns, campaign discounts and advertising each look reasonable on their own, and together they wipe out what was left on the product. The problem is not that these costs exist. It is that none of them are calculated per product.
What the revenue report does not show
The panel tells you units sold and revenue. What it does not tell you is what that sale cost you, because part of the cost lands at order time, part at month end and part when a return comes back.
The practical consequence: your best seller can be your biggest loss maker. It sells well because it is in a campaign, the margin erodes on every order because the shipping cost is high, and a second hit arrives with the return rate. On the dashboard all you see is a rising sales chart.
Four line items, four separate traps
Commission. It varies by category, and when a product is listed in the wrong category you pay the difference for months. Reviewing category mapping even once a year makes a difference.
Shipping. Volumetric weight follows the real size of the parcel. When the box is bigger than the product needs, you pay extra on every single order. Shrinking packaging often works faster than raising prices.
Returns. Not just the product coming back: outbound shipping, return shipping, inspection labour and units that can no longer be sold. On a product with a high return rate, margin erodes faster the more you sell.
Advertising. When channel ads are not written onto the product, the whole campaign looks profitable. Once ad spend is allocated per product, some items turn out to be more profitable without advertising at all.
How to build the contribution margin table
The table does not need to be complicated. For a single product, put these lines side by side:
- Selling price after campaign discounts
- Product cost, purchase or production
- Commission and service fees
- Shipping, based on average volumetric weight
- Return share: return rate times cost per return
- Advertising share: spend on that product divided by units sold
What is left is the contribution margin. The moment that number exists per product, the conversation changes: which product you push stops being a preference and becomes an outcome.
The step where we get stuck most often is return data. Most brands record return reasons and nobody reads them. Yet a large share of returns comes from a single cause: missing size information, an image that misrepresents the product, or a misleading description. Fix those three and the return rate drops, which raises profit without touching prices at all.
What changes once the table exists
The first thing to change is campaign decisions. Adding another discount to a product with thin margin only accelerates the loss. The table makes that impossible to argue with.
The second is the portfolio. Every catalogue carries products that do not earn. Pruning them lowers revenue and raises profit, and that decision cannot be made without numbers, because a drop in revenue feels heavy.
The third is advertising. When budget shifts toward products with real margin, the same spend produces more profit. This is exactly why running ads separately from the commerce side makes no sense; both have to read the same table.
Balancing your own store against the marketplace
One result comes up often once the table exists: the same product is profitable on your own site and loses money on the marketplace. Commission and campaign pressure put the two channels into different economies.
That does not mean leaving the marketplace. It means you do not have to sell every product on every channel. Thin margin items can stay on your own store while volume items work on the marketplace. The marketplace finds customers; your own site is where you win them back.
Every customer whose second purchase you move to your own site pays back the thin margin on the first one. Measuring that means tracking new customer rate and repeat purchase separately.
Three moves that raise margin without raising prices
Shrink the packaging. Shipping is billed on volumetric weight, so box size is a margin line. Fitting the same product into a smaller box is a permanent gain on every order and nothing changes for the customer.
Check category mapping. The category a product sits in decides the commission rate. Products listed years ago often sit in the wrong one. Fixing it costs nothing and pays back on every sale.
Read the return reasons. The report is already in the system and nobody opens it. Returns caused by sizing, images and descriptions drop after a single fix, and every point of return rate lands straight on contribution margin.
Should I join the campaign
Campaign invitations usually get answered on instinct. Once the table exists the question simplifies: is contribution margin still positive after the discount.
Three checks are enough:
- What happens to margin at the discounted price, does it go negative
- Does the extra volume cover the increase in shipping and returns
- Will stock last through the campaign; running out mid campaign costs both penalties and reputation
If all three are positive, a campaign is a good tool. If even one is negative, that campaign grows revenue and shrinks profit.
Where to start
Start with your top twenty products by revenue. Calculating the whole catalogue takes days and is usually unnecessary; revenue tends to concentrate in a narrow group.
Once those twenty have a contribution margin, the picture is clear: which products carry the business and which ride on it. Everything after that is pricing, packaging, category and advertising decisions taken against that number.
If you want to build this yourself, the lines above are enough. If building it is fine but reading the result gets hard, this exact table is what we produce together on the e-commerce consulting side.