Unit Economics
Contribution Margin Explained for Indian D2C Founders
By Sylvr Founder's Desk
The three layers
CM1 — order economics: did the product make money?
CM2 — customer economics: did the first-order customer pay back the marketing?
CM3 — channel economics: did the channel as a whole carry its share of fixed marketing?
Why not gross margin
Gross margin masks channel costs. A brand with a high gross margin selling through high take-rate channels keeps much less at the order level (Example: 60% gross margin less a 30% take-rate leaves 30%). Contribution margins force you to see channel reality.
Questions founders ask
What's a healthy CM1 for Indian beauty?
It varies by category and channel; work out yours per SKU. We do not publish a figure for CM1 on hero SKUs in beauty yet. A low CM1 points to cost of goods or channel fees.
Should CM2 be positive on the first order?
Ideally yes, even slightly. Negative-CM2 brands depend entirely on repeat behaviour, which is risky if retention shifts.
How do I track CM2 by channel?
Use the Sylvr UEP — model each store separately, then look at the blended portfolio view. CM2 by channel is the most important diagnostic number for a multi-channel D2C brand.