Unit Economics
Part of DTC unit economics
Calculating contribution margin per order
Calculate contribution per DTC order from retained revenue, product cost, payment, packing, delivery and returns, with a worked example.
Contribution margin per order is the revenue the business retains minus the costs of making and serving that order. State which costs are included: a figure that stops at product cost omits payment, packing, delivery and potential return costs.
Define the order and revenue
Choose a real order or a clearly labelled scenario, then record its products, quantities, discounts, customer delivery charge and destination. Start with product and delivery revenue after discounts and refunds.
State whether figures include or exclude GST, and use a consistent basis across revenue and costs. Check the treatment against the accounting records; mixing GST-inclusive and GST-exclusive amounts may make the result misleading.
For a multi-item order, add the costs of all units sold. Count separate parcel charges only if the items actually ship separately. Include the cost of a gift or replacement even when the customer pays nothing for it.
List the costs caused by the order
| Cost | What to use |
|---|---|
| Product | Cost of the units sold, with relevant inbound costs assigned consistently. |
| Packing and dispatch | Materials and order-based picking, packing or labour. |
| Payment | Charges attributable to the transaction. |
| Delivery | Carrier and order-specific handling charges. |
| Returns and support | Expected additional cost for the relevant order type, or observed cost for an actual case. |
Keep monthly software fees, general rent and other fixed commitments separate. An allocation of a shared cost may help planning, but label it as an allocation.
For a refunded order, reduce retained revenue by the refund. Count return freight, handling, replacement dispatch or lost product value as costs where they apply. Do not include the refunded amount again in a return-cost allowance.
Work a labelled example
Suppose a hypothetical order has $100 of product revenue and an $8 customer delivery charge, all stated on an assumed consistent basis after any applicable GST adjustment. No refund is assumed in the example revenue.
Product cost is $30, packaging $3, payment charge $2.50, picking and packing $4, and carrier charge $10. Assume $4 of expected return-related freight and handling plus $1 of order-specific support.
Contribution before acquisition = $108 − ($30 + $3 + $2.50 + $4 + $10 + $4 + $1) = $53.50.
The amounts illustrate arithmetic; they are not Australian averages or a tested order. The $4 allowance spreads an estimated cost across this order type. An actual refunded or replaced order needs its own revenue and cost calculation.
Use the result
Compare full-price and discounted orders, single items and bundles, and nearby and costly delivery destinations. Recalculate when product, packaging or carrier costs change. If one case is negative, identify the cost or offer responsible before generalising to every order.
Acquisition spend sits outside this measure. The $53.50 example is therefore neither business profit nor a safe advertising budget: fixed commitments and cash needs still have to be funded.
