Verified Mathematical Model & Formulation
Net Profit = Sales Price - Product Cost - Shipping - Gateway Fee (2.9% + $0.30) - Ad CAC Contribution Margin = Net Profit / Sales Price
Calculates the true unit economics of direct-to-consumer (DTC) storefronts, isolating credit card gateway processing charges and digital acquisition cost (CAC).
Configurable Parameters & Standard Units
- Average Order Value / Price ($): (Default: 50 usd)
- Cost of Goods Sold (COGS) ($): (Default: 10 usd)
- Shipping & Fulfillment ($): (Default: 6 usd)
- Ad Acquisition Cost (CAC) ($): (Default: 16 usd)
- Credit Card Rate (%): (Default: 2.9 percent)
Standard Worked Example & Practical Verification
Scenario: Selling serum bottle for $48.00 with $6.20 COGS, $5.00 shipping, and $18.00 Meta ad acquisition cost.
Calculated Solution
$17.11 Contribution Profit per Order (35.6% Margin)
Practical Takeaway: Healthy DTC model where CAC represents 37.5% of AOV.
Frequently Asked Questions
What is contribution margin in DTC?
Contribution margin is the revenue remaining after all variable costs directly associated with making and shipping an individual order (COGS, shipping, payment fees, and ad CAC).