SKU contribution is what a product leaves after marketplace fees, product cost, advertising and return impact. Start from the net settlement per SKU, subtract product cost and allocated advertising, account for returns, and clearly mark any SKU where an input is missing instead of showing an incomplete figure as profit.
The core inputs
- Net settlement: what the marketplace actually paid for the SKU after commission and fees.
- Product cost: landed cost per unit from your costing.
- Advertising: spend attributed to the SKU, or allocated by a documented rule.
- Returns: reversals, return charges and the value of items not resaleable.
Use settled values, not listed prices
Contribution built on the listed or selling price overstates margin because it ignores commission, fees and returns. Use settled or reconciled values per SKU, and keep open orders separate until their return window closes.
Be explicit about allocations
When advertising or shared costs can't be traced to one SKU, choose an allocation rule, document it and apply it consistently across periods so month-on-month comparisons are fair.
Flag incomplete SKUs
If a SKU has no cost or advertising input, show it as incomplete rather than as high margin. MarketplaceMetrics' profitability views depend on cost and ads inputs, and their accuracy follows the completeness of those inputs.
Worked example
Illustrative example only. A SKU nets ₹1,435 per unit after fees. Product cost is ₹800 and allocated advertising ₹150 per unit, with return impact averaging ₹60. Illustrative contribution is ₹1,435 − ₹800 − ₹150 − ₹60 = ₹425 per unit. Your inputs will differ.
Questions and answers
What is SKU contribution margin?
It is the amount a SKU contributes after its direct costs: marketplace fees, product cost, advertising and return impact. It excludes overheads that aren't tied to the SKU.
Why shouldn't I use the selling price for SKU profitability?
The selling price ignores commission, fees and returns. Net settlement reflects what you actually received.
How should I allocate advertising that covers many SKUs?
Pick a documented rule, such as share of ad-attributed sales, and apply it consistently. Note the rule wherever the figures are shared.