Contribution Margin
The dollar amount left from a furniture sale after subtracting variable costs — the true unit economics of an order.
Full Definition
Contribution margin = revenue minus COGS minus shipping minus payment processing minus returns reserve. It is the dollars actually available to fund marketing, overhead, and profit per order. For furniture, contribution margins typically run 20-40% depending on category and channel.
Healthy paid-marketing programs spend no more than 50% of contribution margin on CAC, leaving the rest for overhead and profit.
Why It Matters for Furniture Brands
Most furniture brands use revenue ROAS as their decision metric, which is misleading. A 3x revenue ROAS on a 25% contribution margin product means the marketing program is just barely breakeven on cash. Contribution margin ROAS is the metric that drives actual profitability.
Related Terms
Return on Ad Spend (ROAS)
📊The revenue generated for every dollar spent on advertising — the key metric for measuring furniture ad campaign profitability.
Customer Acquisition Cost (CAC)
📣The total marketing spend required to acquire one new furniture customer, calculated across all channels.
Average Order Value (AOV)
🛒The average dollar amount spent each time a customer places an order on a furniture website.
Further Reading
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