A single profit number tells you something is wrong without telling you what. NetNet reports four layers, because the costs between them fail for different reasons and have different fixes — pricing, fulfilment, marketing, overhead.
For DTC operators who know their revenue precisely and their true profit approximately. Four layers tell you which of the four is the problem.
“Is my pricing right?”
Revenue − COGS
The ceiling on everything below. If gross margin is thin, no amount of downstream optimisation rescues the business — pricing or sourcing has to change.
“Is my fulfilment efficient?”
CM1 − shipping − transaction fees − payment processing − taxes − per-order fees − chargebacks
What one more order adds. This is the ceiling on customer acquisition cost, and the number that moves fastest when a promotion or a shipping threshold changes.
“Is my marketing efficient?”
CM2 − ad spend
Whether acquisition pays for itself before overhead is considered. Positive means the marketing engine funds the business; negative means ad spend is consuming more margin than it generates.
“Am I actually making money?”
CM3 − custom costs − overhead
The bottom line, after apps, salaries, rent and one-off expenses. The only layer that answers whether the business as a whole works.
Net profit is the same number whether you calculate it in one step or four. What changes is what you can do when it moves.
Collapsed into a single figure, a bad month is a mystery — it could be supplier prices, a shipping threshold, a discount code, an ad account, or a hire made too early. Split into layers, the same month points at one of them.
| What moved | Usual cause | Where the fix is |
|---|---|---|
| Gross margin falling | Supplier costs, discount depth, or a mix shift toward cheaper products. | Pricing and sourcing. Nothing below this layer is relevant to the question. |
| Gross margin holding, contribution margin falling | Delivery, packaging, payment mix or refunds — the costs of serving an order. | Shipping rules, parcel dimensions, gateway configuration, return handling. |
| Contribution margin holding, marketing profit falling | Acquisition cost rising faster than the margin funding it. | Channel mix, bid ceilings, or accepting a lower growth rate. |
| Marketing profit positive, net profit negative | Not enough orders to carry the fixed cost base. | A scale problem, not an economics one — cutting spend usually makes it worse. |
Contribution margin and marketing profit are standard management-accounting ideas, not something we invented — other tools report versions of them, and several are better than NetNet at things we do not attempt, such as attribution and multi-store reporting. What we have done is make all four layers first-class, computed per order and reconciled to one another. If you want the honest per-product comparison, it is on the compare pages, where every entry states what the other tool does better.
A single net profit figure tells you the outcome and nothing about the cause. When it falls, the number itself cannot say whether goods got more expensive, fulfilment got worse, advertising got less efficient, or overheads grew — and those four have entirely different responses.
Separating the ladder into layers makes the cause visible in the same glance as the outcome. Each layer answers one question and deducts one class of cost, so a movement shows up at the level where it happened.
The layers are also the natural boundaries of responsibility. Sourcing owns the first, operations the second, marketing the third, and the business as a whole the fourth. A single blended number belongs to everyone and therefore to no one.
When gross margin holds and contribution margin falls, the change is in fulfilment — carrier rates, parcel weights, a shift toward markets that cost more to serve, or a free-shipping threshold that no longer covers its own cost.
When contribution margin holds and profit after marketing falls, acquisition got more expensive or the mix moved toward products that convert well and earn less.
When everything above net profit holds and net profit falls, the change is in fixed costs — usually accumulated software subscriptions or a headcount addition, neither of which appears anywhere in a per-order calculation.
Each of those diagnoses takes seconds when the layers are visible and can take a week of spreadsheet work when they are not.
Four layers, computed on every order. 14-day free trial, no card required.
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