You price a product to keep a 30% margin and get $26.84. Then you add $2 of ad spend and $1 for returns on each order. Your 30% margin is now 18.8%. To get back to 30% you'd need to charge $32.11, which is $5.27 more.
That is the problem with pricing from the fees alone. This checklist is what I'd run through before listing anything. The numbers are examples, so swap in your own.
What should I include?
- Product cost, landed. What the item costs by the time it reaches you: purchase price, freight, import charges and any supplier fees.
- Packaging. Boxes, tape, inserts, labels. It's small per order and easy to forget.
- Shipping you pay. And how much of it, if any, you charge the buyer.
- The platform's percentage fee. Commission, referral fee or final value fee.
- Payment processing. A percentage and often a fixed amount.
- Other fixed fees. Per-order or listing fees. I wrote about why they matter on small orders.
- Tax taken at source. Some platforms withhold tax from your payout. What applies to you is a question for an accountant, and I can't answer it.
- A returns allowance. Some orders come back. Spread what you lose over every order.
- Ad spend per order. Your ad budget divided by the orders it brings in.
- Your discount plan. The most you can take off before you lose money. See break-even price.
- Your target margin. The number you price towards.
How do I turn a returns allowance into a number?
Estimate how many orders come back, and what each one costs you. Say 1 order in 20 is returned, and each return loses you about $20 in cost, shipping and fees you don't get back. That's $20 / 20 = $1 per order, on average. Treat it as a fixed cost, like shipping.
The 1 in 20 and the $20 are made-up numbers for this example. Use what your own orders show. If you have no history yet, make a guess and update it after your first month.
What does it do to the price?
Start with the earlier example: $10 cost, $5 shipping, 13% in percentage fees, 30 cents flat, and a 30% target.
| Costs included | Fixed costs | Price for 30% margin |
|---|---|---|
| Fees only | $15.30 | $26.84 |
| Fees, $2 ads and $1 returns | $18.30 | $32.11 |
The second row uses the usual formula: 18.30 / (1 - 0.13 - 0.30) = 18.30 / 0.57 = $32.11. I explain that formula in my guide on pricing for a 30% margin.
If you had stayed at $26.84, you'd keep $26.84 - $18 - $3.79 in fees = $5.05. That is 18.8% of the price, not 30%.
What do I check before I publish?
- Does the price still leave a margin after every cost above?
- Is it above break-even with a sensible discount applied?
- Is it close to what similar listings sell for? If not, which cost can you cut?
- Did you use the fee rates for your category and country, not an example?
How do I run this in the calculator?
Open the multi-platform calculator. Put your cost in the item cost box and your postage and packaging in the shipping box. Then fill in the Ads and returns section: your ad spend per order, your return rate and what a return costs you. The calculator turns the last two into the allowance for you. Set the target margin and read the suggested price.
Who is writing this?
I'm Saqib, the developer behind PayoutCalc. I haven't run an online shop. This is a list and some arithmetic. The example numbers were checked in the calculator, and the ad and returns figures are made up to show the method. If you think I've missed something, tell me.