> For the complete documentation index, see [llms.txt](https://help.daasity.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.daasity.com/core-concepts/contribution-margin.md).

# Contribution Margin

Contribution Margin gives you a daily view of how much you actually keep from every dollar of sales - after product costs, fulfillment, marketing, and trade spend - broken out by product, channel, and store location across all of your sales channels.

This page explains what Contribution Margin is, why brands use it, and how Daasity calculates it. For setup and configuration, see [Contribution Margin - BSD](https://help.daasity.com/core-concepts/contribution-margin/contribution-margin-bsd).

### What is Contribution Margin?

Gross margin tells you what's left after the cost of the product itself. Contribution Margin goes further: it's what's left after every operational cost tied to selling that product - shipping, fulfillment, payment processing, platform fees, marketing spend, and trade spend.

That makes it the closest daily measure of a simple question: **did this sale actually make us money?**

Daasity calculates Contribution Margin at the most granular level your data supports:

* **Daily** - not weeks after month-end close
* **By product (SKU)** - not just company-wide totals
* **By channel and store location** - across DTC, marketplaces, wholesale, and retail

### Why brands use it

Most brands only see profitability after the books close, aggregated to the company or channel level. By the time the numbers arrive, the decision window has passed. Daily, granular Contribution Margin lets your team act while it still matters:

**Negotiate with retailers from your own numbers.** Trade spend, chargebacks, and slotting fees all land differently at different retailers. Store- and retailer-level margin shows you exactly what you earn on each retailer's shelves, so pricing and trade spend conversations start from your data, not theirs.

**Fix your product mix.** High revenue doesn't mean high profit. A top-selling SKU can carry shipping, return, or ad costs that erase its margin. Product-level Contribution Margin shows which SKUs generate cash and which quietly drain it.

**Put marketing dollars where the margin is.** ROAS measures revenue, not profit. Because Daasity matches marketing and trade spend against sales across every channel, you can compare what a dollar of spend actually returns in margin - and shift budget toward the channels and products where it works hardest.

**Catch cost creep early.** Returns, compliance fines, shipping rate increases, and platform fees show up in the daily numbers as they happen - not as a surprise at the end of the quarter.

### The margin waterfall

Contribution Margin is built as a waterfall, so you can see exactly where each dollar goes between the customer's purchase and your bottom line:

| Step                                     | Formula                                                                    | What it tells you                                                          |
| ---------------------------------------- | -------------------------------------------------------------------------- | -------------------------------------------------------------------------- |
| **Gross Sales**                          | Sales at list price, before deductions                                     | Top-line demand                                                            |
| **Net Sales**                            | Gross Sales − Discounts − Returns                                          | What your brand actually receives                                          |
| **Gross Margin**                         | Net Sales − COGS                                                           | Margin after the landed cost of the product                                |
| **Product Contribution (CM1)**           | Gross Margin − Shipping − Fulfillment − Payment Processing − Platform Fees | Whether your pricing and fulfillment structure works, before any marketing |
| **Marketing & Trade Contribution (CM2)** | CM1 − Marketing Spend − Trade Spend                                        | Your true operational profitability                                        |

<details>

<summary>A few definitions worth calling out:</summary>

* **COGS** is the landed cost of your product, including inbound freight and duties.
* **Platform fees** are channel-specific selling costs, such as marketplace referral and FBA fees.
* **Trade spend** covers both volume-based programs (billbacks, off-invoice, temporary price reductions) and fixed-fee programs (displays, slotting fees).

</details>

{% hint style="info" %}
**Note for wholesale channels:** Daasity separates **Net Sales** (the wholesale price you receive) from **POS Sales** (the retail price the consumer pays at checkout). Your wholesale margins are calculated on what you were actually paid, never inflated by consumer-level pricing.
{% endhint %}

### How Daasity calculates it

**One model across every channel.** Sales from your digital channels (e.g., Shopify, Amazon, Walmart Marketplace) and your retail and wholesale channels are normalized into a single model, so margin is comparable across all of them.

**Contribution Channels.** Every sales source is mapped to a Contribution Channel, and channels roll up into the groupings you define (for example, individual retail banners rolling up to Retail). This mapping is yours to control - see [Contribution Margin BSD](https://help.daasity.com/core-concepts/contribution-margin/contribution-margin-bsd).

**Costs are allocated the way your business actually runs.** Many costs arrive as lump sums - a monthly warehouse invoice, an agency retainer, a campaign that spans many products. Daasity allocates these proportionally to your sales (by revenue or by units, your choice), so days and products with more sales carry the appropriate share of the cost. Spend that lands on a day or product with no sales is still captured and carried in the model rather than dropped.

### Reading the numbers

Two things to keep in mind when interpreting Contribution Margin, especially early in your setup:

* **A cost that isn't configured counts as $0.** If a cost input (COGS, payment processing rates, other costs) hasn't been set up yet, or a custom COGS entry doesn't cover a date range, margin for that slice will look higher than reality. Complete cost coverage is what makes the number trustworthy - start with COGS, then layer in the rest.
* **Only mapped sales sources appear.** When you add a new sales channel or store, add it to your channel mapping so its revenue and costs flow into the report.

### Get started

{% stepper %}
{% step %}

### **Configure your cost model**

Map your channels, upload SKU costs, and set your allocation preferences in [Contribution Margin BSD](https://help.daasity.com/core-concepts/contribution-margin/contribution-margin-bsd).
{% endstep %}

{% step %}

### **Explore your margin**

Use the Contribution Margin explore to analyze CM1 and CM2 by day, product, channel, and location, and to build the views your team reviews.
{% endstep %}
{% endstepper %}