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CM2 % tells you how many cents of each net revenue dollar are left after every per-order cost and before any marketing. It is the ceiling on what you can spend to acquire and retain customers without losing money on orders.

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Formula

CM2 % = ( CM2 ÷ Net Revenue ) × 100

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Formula Components

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How It Works

Upstack sums CM2 and net revenue across the whole range and divides once, so the period total is a revenue-weighted rate, not an average of daily percentages. Discounts and refunds appear in both the numerator and the denominator. That means a heavier discount lowers CM2 % more than it lowers revenue: the discount comes off revenue, but product, shipping, and payment costs stay the same. The fulfillment and transaction costs come from the shipping mode, product defaults, order fees, and payment processing fees you set in Cost settings.

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Example

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How to Interpret It

CM2 % is the break-even line for marketing. In this example, if ad spend plus marketing costs go above 46% of net revenue, CM3 turns negative. Put another way, the break-even ROAS on net revenue is 1 ÷ 0.46, about 2.17.
  • CM2 % falling while CM1 % holds means per-order costs are growing faster than revenue: carrier rate increases, more small orders, or a payment method with higher fees.
  • CM2 % and CM1 % falling together usually traces back to discounts or COGS.
  • Large gap between CM1 % and CM2 % means fulfillment is a big share of your cost structure. Raising the free-shipping threshold or AOV often helps more than negotiating COGS.

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Common Pitfalls

  • Shipping mode matters. With Use Shopify Shipping Charges, the shipping cost on each order is the amount the customer paid. Free-shipping orders then carry zero shipping cost and CM2 % looks better than your carrier bills. Use Fixed Rate Per Order or Shipping Profiles if that’s the case.
  • Payment fees need gateways configured. Gateway cost stays at zero for any gateway without a fee entry.

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FAQ

High enough to pay for the marketing it takes to sell. If you need to spend 30% of revenue on ads to hit your sales target, a CM2 % of 35% leaves 5 points for overhead and profit. Set your target from your own marketing intensity rather than an industry figure.
CM3 % also subtracts ad spend and marketing costs. CM2 % shows unit economics before marketing; CM3 % shows what is left after it.
See all Contribution Margin metrics →