What is contribution margin on Amazon and how is it calculated?
Contribution margin on Amazon is the money left from each sale after variable costs: COGS, referral fee, FBA fee, refunds, and ad spend. It excludes fixed costs like software subscriptions and salaries. Formula: Contribution margin = Revenue - COGS - Amazon fees - PPC - refunds. A 25% to 40% contribution margin per SKU is a healthy target.
Oct 14, 2026 · 3 min read
Why contribution margin is more useful than gross margin
Gross margin (revenue minus COGS) ignores the fact that every Amazon sale carries fees and ad cost. Contribution margin adds those variable costs back, which is what actually funds fixed costs and profit. A SKU with 60% gross margin can carry only 15% contribution margin after Amazon takes its share, which changes every merchandising decision.
How to compute per SKU
Sum revenue for the period. Subtract landed COGS for the units sold. Subtract Amazon fees on those units (referral, FBA, storage, aged inventory, low-inventory-level). Subtract refunds and reimbursement gaps. Subtract product-level ad spend. What remains is contribution margin.
How Nova exposes contribution margin
Nova computes contribution margin per SKU per day using the P&L. You can filter to SKUs where contribution margin dropped week-on-week and see which fee line moved.
Frequently asked questions
Is contribution margin the same as net profit?
No. Contribution margin excludes fixed overhead like SaaS subscriptions, salaries, or office rent. Net profit is contribution margin minus those fixed costs.
What contribution margin is too low?
Below 15% is usually not viable long-term because there is no room to absorb fee hikes or ad-cost spikes. Aim for 25% or above on private label.
See this in Nova
Nova surfaces this metric per SKU so you can act before your next monthly close catches it.
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How do I calculate profit per unit on Amazon?
Profit per unit on Amazon equals sale price minus referral fee, FBA fulfilment fee, per-unit COGS, allocated ad spend, and a refund reserve. A quick formula: Profit/unit = Price - (Referral% x Price) - FBA fee - COGS - (Ad spend / units sold) - (Refund rate x Price).
What is a good net profit margin on Amazon FBA?
A healthy Amazon FBA net profit margin sits between 15% and 25% after fees, COGS, PPC, and refunds. Under 10% usually signals hidden fees or overspending on ads. Established brands with private-label pricing power can hold 25% or more, while resellers and wholesalers typically operate closer to 10% to 15%.