Contribution Margin 2 (CM2) Calculator
Calculate Contribution Margin 2, CM1 minus variable fulfillment, packaging, payment processing, and returns.
About this tool
CM2 = CM1 − variable order costs (outbound shipping, packaging, payment processing, return shipping, restocking). The true per-order margin before marketing.
Frequently asked questions
What is CM2 in D2C unit economics? +
CM2 (Contribution Margin 2) is CM1 minus variable order costs: outbound shipping, packaging, payment processing fees, and an allocation for returns. CM2 represents the true per-order margin before any marketing or retention spend. Healthy D2C CM2 sits in the 30-50% range.
Why is CM2 more honest than gross margin? +
Gross margin (CM1) ignores the real cost of getting product to a customer. A brand reporting 65% gross margin might have only 35% CM2 once shipping, packaging, payment fees and returns are subtracted. CM2 is what you actually have left to spend on marketing and operations.
How do I allocate returns cost per order? +
Total returns cost (return shipping + restocking labour + unsellable inventory writedown) divided by total orders placed. If you process 5,000 orders and spend $15,000 on returns ops, your per-order returns allocation is $3. Apparel brands often see $5-10 per order; supplements under $1.
What's a good CM2 percentage benchmark? +
By vertical: Apparel 30-45% (high return rates compress it), Beauty 45-60% (low returns, lighter shipping), F&B 15-30% (refrigeration + heavy weight), Electronics 15-30% (high shipping cost, warranty allocation). Anything under 20% makes the path to profit very difficult.
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