Pricing

Ecommerce Pricing Formula Guide

A useful ecommerce pricing formula starts with the real selling price after discounts and subtracts every variable cost required to deliver the order. This produces contribution profit, the number sellers should use before scaling ads.

Formula

Contribution profit = net revenue - product cost - fulfillment - platform fees - payment fees - returns allowance - packaging - ad spend.

Target margin

After calculating contribution profit, divide it by net revenue to get contribution margin. Set a target margin that leaves room for overhead, taxes, software and reinvestment.

Use scenarios

Build conservative, expected and aggressive cases. If the product only works in the aggressive case, improve the offer before buying inventory or increasing ad spend.

Related tools

TikTok Shop Profit Calculator, Amazon FBA Fee Calculator, and Shopify Margin Calculator.