The formula
Contribution margin per order equals the sale price, minus cost of goods sold, minus platform commission, minus the transaction fee, minus any ad spend attributed to that order, minus payment processing where it is charged separately from the platform’s own transaction fee.
Every term in that list scales with the order. Fixed costs, warehouse rent, salaries, software subscriptions, do not belong in this calculation. Contribution margin answers one question only: did this specific order make money, before overhead.
Why GMV cannot answer this question
A platform dashboard reports GMV, the sale price before any fee is removed. A S$50 order shows as S$50 of GMV regardless of whether the seller kept S$35 or S$12 of it. Two sellers with identical GMV can have completely different businesses once contribution margin is applied, and a growth strategy built on GMV alone can scale a seller straight into a thinner and thinner margin without the dashboard ever showing a warning sign.
This is the mechanical reason platform incentives and seller incentives diverge. A platform’s own growth metric is exactly the number that hides the seller’s actual outcome.
A worked example
A seller lists a S$50 skincare product on a SEA marketplace. Cost of goods is S$18. Platform commission on this category runs 7% of the sale price, S$3.50. The transaction fee is 2.18%, S$1.09. The seller ran a product ad campaign that cost S$4 per resulting sale, attributed here as S$4. Outbound shipping not covered by the buyer adds S$2.50.
Contribution margin: S$50 minus S$18 minus S$3.50 minus S$1.09 minus S$4 minus S$2.50 equals S$20.91, or roughly 42% of the sale price.
Run the same product through a heavier promotional period, ad cost per sale rising to S$9 and a voucher discount of S$5 off the sale price funded by the seller. Revenue drops to S$45, ad cost rises to S$9, and contribution margin falls to S$45 minus S$18 minus S$3.15 (commission on the discounted price) minus S$0.98 minus S$9 minus S$2.50, or S$11.37, roughly 25% of the discounted sale price. Same product, same platform, GMV looks similar or higher during the promotion, and margin has nearly halved.
What changes the number most
Ad spend attribution is the term sellers most often get wrong, either omitting it entirely or averaging it across all orders rather than attributing it to the specific campaign that drove the sale. A seller who tracks ad spend at the campaign level, not the account level, catches margin erosion before it shows up in a quarterly cash crunch.
Category commission is the second lever, and it is the one sellers have least control over, since platforms set and periodically raise category rates. Recalculating margin whenever a platform announces a fee change, rather than waiting for the effect to show up in bank balance, is the difference between adjusting price proactively and discovering the problem a month late.
The decision this number should drive
A seller running a promotion should check contribution margin before the promotion, not after. If the discount plus the ad spend plus commission on the discounted price pushes contribution margin close to zero or negative, the promotion is buying revenue, not profit, and GMV growth from it is not a business outcome worth optimising for on its own.
Recalculate per-order contribution margin before the next campaign launches, not after it ends.