Marketplace commission and working out your real profit
Which deductions exist beyond commission, and which items belong in the calculation when you set a selling price.
On a marketplace the "commission rate" alone does not show your profit. When setting a selling price you need to see all of the deductions.
Items that belong in the calculation
- Commission. It varies by category; different products in the same store are charged at different rates.
- Service and transaction fees. Fixed amounts per order grow proportionally larger on small baskets.
- Shipping. If you offer free shipping, the cost is yours.
- Returns. In categories with a high return rate the round-trip shipping cost reduces profit significantly.
- Campaign discount. The discount on a campaign you join is usually borne by the seller.
- Advertising. On-channel ad spend is a cost of sale too.
A simple way to check
After subtracting every deduction from the selling price, compare what is left with what the product costs you. The difference is the real profit on that product. This has to be done per product, not per category; averaging hides the products you are selling at a loss.
Set a margin threshold
Making campaign decisions by rule rather than by feel is the healthiest approach. Keeping products that fall below your minimum margin out of campaigns stops profit eroding while revenue grows.
