A MARKETPLACE PRODUCT PRICING FORMULA TO AVOID HIDDEN LOSSES
A very common mistake among new online shops is multiplying the purchase cost by an arbitrary number to set the selling price, or looking at competitors' prices and undercutting them.
This approach is very dangerous. On marketplaces such as Shopee or TikTok Shop, many additional costs arise. If you do not build them into the selling price from the outset, higher revenue will mean greater losses.
To make sure every order generates actual profit, apply the systematic product-pricing formula below.
1. Identify the product's true base cost
A product's cost is not just the amount paid to the supplier to buy it. It must include:
- The original purchase price.
- Shipping costs from the supplier to your warehouse.
- The costs of labels, packaging, boxes, protective bags and tape. Add all of these together to calculate the most accurate cost per product.
2. Add the percentage paid to the marketplace (Marketplace Fees)
As noted, marketplaces charge around 15%–20% of the selling price in payment fees, fixed fees and promotional programme fees. When setting prices, calculate so that the amount remaining after these marketplace percentages is still above your original cost.
3. Set Aside a Risk Reserve (Refused Deliveries and Defective Goods)
In online business, returns and refused deliveries are unavoidable. You need a reserve known as a risk allowance.
- How to calculate it: Set aside around 3% to 5% of the product's value for this reserve. It will cover damaged boxes, goods lost during shipping and repackaging costs.
4. Calculate Advertising Costs and Staff Salaries per Product
To generate orders, you need to spend on ads, chat support staff, packing staff, utilities and premises.
- How to break it down: Divide the month's total fixed operating costs by the number of orders you expect to sell that month. This gives you the operating cost each product needs to bear.
CONCLUSION
A properly calculated selling price should leave you a fair payment for your work after deducting purchase costs, boxes, marketplace fees, advertising and a reserve for refused deliveries. Never enter a price-cutting war with competitors without careful calculations, because business is about real profit, not the title of a thousand-order seller with empty pockets.
