Unit Economics
CM1 vs CM2 explained, with a free planner
By Sylvr Founder's Desk
Step 1: Calculate CM1
CM1 = Selling Price − COGS − Platform Commission − Fulfilment − Returns
Worked example (Sample data; every input is the example's): a ₹649 face wash.
- Selling price: ₹649
- Cost of goods: ₹247
- Platform commission: ₹150
- Fulfilment: ₹55
- Returns: ₹39
- CM1 = ₹649 − ₹247 − ₹150 − ₹55 − ₹39 = ₹158 (24.3%)
Step 2: Calculate CM2
CM2 = CM1 − Customer Acquisition Cost (CAC)
CAC = total marketing spend ÷ new customers acquired.
If you spent ₹50,000 on ads and won 200 new customers, CAC = ₹50,000 ÷ 200 = ₹250 (Sample data).
Continuing the example:
- CM1: ₹158
- CAC: ₹250
- CM2 = −₹92 (a first-order loss)
A negative CM2 on the first order is not a failure by itself. What matters is whether later orders earn it back, which is what LTV:CAC shows.
What to compare your CM1 and CM2 with
There is no single right CM1 or CM2: they depend on your cost of goods, the fees of the channel you sell on (see the Amazon fees answer), shipping, returns and your own repeat purchase. We do not publish ranges for them. Enter your own numbers in the planner and compare channels on what you keep per order.
Questions founders ask
What is CM1 in D2C?
CM1 (Contribution Margin 1) is the revenue from an order minus all variable costs directly tied to that order — COGS, platform fees, fulfilment, and returns. It answers: 'Did this order make money on its own, before marketing?'
What is CM2 in D2C?
CM2 (Contribution Margin 2) is CM1 minus the Customer Acquisition Cost (CAC). It answers: 'Did acquiring and servicing this customer make money on the first order?'
What is a good CM1 for a beauty brand on Amazon India?
There is no single figure we can source. It depends on your cost of goods, the referral and closing fees for your category and price (see the Amazon India seller fees answer), shipping and returns. Enter your own numbers in the planner.