Contribution Margin Benchmarks for Indian D2C Brands by Category

What contribution margins do Indian D2C brands make by category?#

Beauty and jewellery keep the most after marketing, 20% of net revenue each, while footwear keeps the least at 7.5%. These benchmarks come from ProfitBox360 research, 2025 (client data and shopper surveys).

Every figure is a share of net revenue.

Calculate each margin the way the benchmarks do#

Start from net revenue: what customers paid after discounts, cancellations, RTOs and returns, without GST. Then take costs off in three layers:

CM1 = net revenue − product cost

CM2 = CM1 − shipping, packaging, payment, RTO and return costs

CM3 = CM2 − marketing

Margin % = margin ÷ net revenue × 100

Put each cost in the same layer as the benchmarks:

• Product cost: what the goods you sold cost you to make or buy.
• CM2 costs: forward shipping, packaging, payment gateway and COD charges, RTO freight and handling, and reverse pickup for returns. Marketplace commissions and fulfilment fees belong here too.
• Marketing: paid ads, influencer fees, brand campaigns and agency fees.

Keep salaries, rent and software out of all three layers. They come off after CM3.

Where each category's revenue goes#

Fashion and footwear lose the most between CM1 and CM2, because so many of their orders come back.

Each row adds up to 100% of net revenue. Product cost is 100% minus CM1, the middle column is CM1 minus CM2, and marketing is CM2 minus CM3.

Three patterns stand out:

• Fashion and footwear start with a healthy CM1, then lose 30 and 28.5 points before any marketing. About 23.8% of delivered fashion orders and 21% of footwear orders are returned. Each return costs about ₹117.50 in reverse pickup and handling.
• Electronics has the thinnest CM1, at 40%, but loses only 10.5 points to shipping, payment and returns.
• Beauty, health and jewellery have the highest CM1 and spend the most on marketing: 34, 35 and 40 points of net revenue.

Walk one brand from revenue to CM3#

Illustrative example: a fashion brand that earns exactly the fashion and apparel benchmarks.

• Net revenue: ₹3,00,00,000 a month, or ₹36 crore a year (assumption)
• Average net revenue per order: ₹1,500, so 20,000 orders a month (assumption)
• Every margin: the fashion and apparel benchmarks above

The brand spends ₹382.50 on marketing for each order and keeps ₹127.50 to pay salaries, rent and everything else. CM2 is the ceiling on marketing. If marketing climbs above ₹510 per order, or 34% of net revenue, CM3 turns negative.

How much do brands spend on marketing as they grow?#

Marketing takes about 29% of net revenue for brands under ₹10 crore a year, and the share falls at each stage to about 14% above ₹200 crore.

Larger brands sell more to people who already know them. Lenskart's Q4 FY26 shareholders' letter shows its India marketing falling from 6.7% to 5.9% of revenue, even though the rupee spend rose 26.6%. The company credits repeat customers and word of mouth.

Category matters as much as size. Honasa Consumer, the beauty company behind Mamaearth, had ₹2,392 crore of revenue in FY26. Its FY26 investor presentation shows 32.9% of that going on advertising, down from 36% in FY25. That's more than twice the 14% stage average, and close to the 34 points the beauty benchmarks leave between CM2 and CM3.

Set the marketing budget from CM2#

Marketing budget = net revenue × (CM2 − target CM3) ÷ 100

Enter CM2 and the target CM3 as percentages. For the fashion brand above: ₹3,00,00,000 × (34 − 8.5) ÷ 100 = ₹76,50,000 a month.

1. Work out CM2 for the last three months from your own accounts.
2. Pick a CM3 target, starting with your category's benchmark.
3. Treat the gap between the two as the most you can spend on marketing, as a share of net revenue.
4. Compare that gap with the average for your revenue stage. If you're well above it, check that new customers are reordering before you raise the budget.

What moving up a stage does to marketing#

Illustrative example: the fashion brand above grows from ₹3,00,00,000 to ₹5,00,00,000 of net revenue a month. That's ₹36 crore to ₹60 crore a year, which moves it from the ₹10–50 crore stage to the ₹50–200 crore stage.

• CM2 stays at 34% (assumption)
• The marketing share falls by the same 5.5 percentage points as the stage averages (23.5% to 18%), so from 25.5% to 20% (assumption)

Marketing spend still rises by ₹23,50,000 a month. But CM3 grows about 2.7 times on 66.7% more revenue. The lower share is worth ₹27,50,000 a month against spending 25.5% at the larger size.

The stage averages compare different brands, not one brand over time. A lower share has to be earned through repeat orders and a better-known name.

What margins do listed Indian D2C brands report?#

Of the five companies below, only Nykaa reports a contribution margin: 20.2% of revenue in FY26. The others report gross margin, marketing spend and EBITDA, each on its own definition, so read them as rough guides to CM1 and CM3, not exact matches.

The table also draws on Nykaa's FY26 investor presentation, Wakefit's FY26 investor release and boAt's IPO document, filed with SEBI in October 2025.

Read each figure against its definition#

• Gross margin is the nearest public figure to CM1. Nykaa defines gross profit as revenue minus cost of goods sold. Lenskart's product margin is revenue minus materials, purchases and inventory changes. Honasa's 70.1% sits close to the 71.5% beauty CM1 benchmark.
• Nykaa's contribution margin is the closest to CM3. It takes fulfilment, marketing and selling costs off gross profit, but books branding media under other expenses instead. It's also a retailer's margin, not a brand's.
• EBITDA sits below CM3, because it also takes off salaries and overheads. Lease accounting moves it too. Wakefit's operating EBITDA counts lease rent as a cost and leaves out share-option charges and one-off items. On that basis its FY26 margin was 7.5%, against 12.2% reported.
• Lenskart shows the same gap. Its India EBITDA was 21.1% in the fourth quarter of FY26, or 15.3% after rent.

Use filings as a sense check#

1. Match the metric. Compare your CM1 with a gross margin, and your CM3 only with a contribution margin that includes all marketing.
2. Match the period. A single quarter can include a festive sale, while a full year evens it out.
3. Match the business model. A multi-brand retailer, a store-led brand and an online-first brand carry different costs between CM1 and CM3.

FAQ#

Is gross margin the same as CM1?#

Gross margin isn't quite CM1, but it's the closest figure most listed companies publish. Both take the cost of goods off revenue, yet each company decides what that cost includes, such as inward freight or packaging. Read the company's definition first, then compare its gross margin with your own CM1.

Should brand campaigns count as marketing in CM3?#

Yes. Put performance ads, influencer fees, brand campaigns and agency fees all into marketing, so CM3 shows what growth really costs. Nykaa's reported contribution margin leaves branding media out and books it under other expenses. That makes its figure read higher than a full CM3 would, so adjust before comparing.

Where do RTO and customer returns go in the margin stack?#

RTOs and customer returns both belong in CM2, next to shipping, packaging and payment costs. An RTO costs about ₹172.50 per shipment in forward freight, return freight and handling. A customer return costs about ₹117.50 in reverse pickup and handling. That's why fashion and footwear lose 30 and 28.5 points between CM1 and CM2.

Does selling on marketplaces change the calculation?#

No, the formula stays the same, but marketplace commissions and fulfilment fees go into CM2 next to your own shipping costs. Honasa Consumer's FY26 investor presentation shows this order in an illustration, taking logistics, fulfilment and sales commission off between gross margin and contribution margin. Work out CM2 separately for your website and each marketplace.

Why is EBITDA lower than CM3?#

EBITDA also takes off the costs that CM3 leaves in: salaries, software, office costs and other overheads. Honasa Consumer's employee costs alone came to 11% of revenue in FY26. Treat CM3 as the money left to pay the team and run the business, and EBITDA as what remains after that.

What CM3 should a new D2C brand aim for?#

Aim first for your category's CM3 benchmark: about 13% across categories, from 7.5% in footwear to 20% in beauty and jewellery. A negative CM3 means each sale loses money even before salaries and rent. Fix pricing, returns or marketing spend before you scale, then build CM3 high enough to cover fixed costs.