Today we would like to touch on the exciting theme of selling on multi-channel marketplaces. Is even selling on the global marketplaces profitable for small businesses?
In our Salestio — Amazon & Ebay Integration, we see sellers starting with dropshipping business, expanding their business to online marketplaces, like Amazon and eBay, and then seeing that all profit is consumed by commission.
So let’s take a look today at how Amazon marketplace calculates commission for services for merchants that would like to do fulfillment on their own (Fulfilled by Merchant’s orders in amazon glossary).
Amazon Seller Fee is contained in the following parts:
Usually, there are no questions from sellers, for a monthly subscription charge. You pay the monthly costs and have the possibility to:
But with “Referral fees” nothing is so clear. And for new sellers is usually a big surprise when they ended up paying high fees for amazon orders.
First and most important we need to know, that amazon referral are calculated based on the product category and can’t be less than the minimum fee for a specific category.
So to summarize:
A merchant could pull data from all amazon fees, directly from the Seller Central account. It’s located at Seller Central > Reports > Payments > All Statements View.
As we mentioned above, the amazon referral fee is very much dependent on the category and marketplace where you sell your product.
Please notice that the fee is applied to a listing price together with the cost for shipping.
Detailed information for fees for every marketplace you can find used the following links.
North America Region
US marketplace — https://sellercentral.amazon.com/help/hub/reference/GTG4BAWSY39Z98Z3
Far East Region
Let’s take a look at one example of a calculation fee for sales in the Clothing category for Amazon Germany.
According to the Amazon Referral fee help article, the percentage of the fee will be 15%, but not less than €0.30
In our example, we are going to sell drop shipped T-Shirts with prints. Our supplier’s cost for T-Shirts is 14€ plus a 3€ shipping fee.
Let’s say we would like to receive a 30% income from every t-shirt sold on our website.
So finally the price of the item should be 22.10€.
Let’s calculate how much we need to pay to amazon as commission.
Amazon referall fee: 22.10€ *15% = 3.32€
Remain profit of 18.78€ — 17€ (cost of the product with shipping) gives us remain profit of 1.78€ from a single sale.
No surprise that due to amazon’s commission, in our initial calculation profit is not so existing.
Increasing Margin, as expected increases profit you as a seller
However, it’s important not to forget about returned goods. Normally all Amazon buyers will expect that return of items is easily managed and they could easily receive a refund for items they don’t like.
Amazon commission is pretty high for low-margin business owners. So you should be very careful when trying to sell items with a lot of profit to you. Considering the number of returns instead of revenue you can count losses.
How to solve this? Either increasing margin for your items, by taking a risk having risk with dropping sales. Or finding a good and popular product that could drive you a lot of sales.
In any case, multi-channel sales are not so easy. And our app “Salestio — Amazon & Ebay Integration” could help you with automatizing daily routine tasks.