Markup advice?

[steve70]

Hi

Would really appreciate advice from ebay and Amazon sellers in terms of markup and price to sell products(once bought from supliers) . I feel that a 100% markup should be the minimum aim(considering eBay, Amazon, PayPal fees, postage deduction etc). Anything below this then it makes it really difficult.

Am I correct in thinking this or is this too high of a markup? what do you guys normally aim for and achieve?

Really appreciate your advice

 

[PipeTen-Carl]

I'd be looking at the price others are charging for similar products on said market places, working backwards from this should give you a rough idea of what the average margins are for your product type/sector and where your intended margins would put you against the competition.

 

[CreativeWest]

Amazon work on 30% gross profit margin with 0% net so that's the baseline. You need to understand that there are many crazy sellers out there, they will price a 0% markup not realizing that they are paying the customer to buy from them. In the end it comes down to product, department stores like Saks have 200-300% markup.

 

[Pish_Pash]

If using Amazon's FBA service, then doubling is what I do, for example a product costing me £5.00 (landed cost), I sell for £11.99 inc VAT (more if the market will sustain it)

Why? because Amazon take a large chunk, typically £2.50 ~ £3.00 on a sale (albeit that commission includes the delivery of the product), so for that £11.99 selling price, £2.00 goes to HMRC, £2.50 goes to Amazon, this leaves me with about £2.00~£2.50 profit on my original £5.00 outlay. It's important to emphasize, that this is using FBA, so that £2.00~£2.50 is pure profit...there are no other costs involved.

For ebay, it depends on whether you are offering free postage or not...if you are, then the markup will be broadly similar to Amazon's (as you'll be paying for the postage & you'll incur Paypal fees).

It's always alarming to see my gross profit vs. my pre tax profit... yikes (worse still, there's not much I can do about such costs...it's the high cost of being part of the marketplaces)

 

[Matt Thorpe]

Hi Steve, it is worth researching the market to see what your products are actually worth. There is not strict rule for price when selling direct.

Your products can sell for more if you create value for the customer (i.e great benefits, great images, engaging product descriptions, etc.)

Start at a higher price (not too high) and work your way down until you find your sweet spot. 100% mark-up is probably a good place to start but be aware that you may lose the buy box. You don't really want to get into a price war on Amazon because you will lose to people willing to make a loss.

 

[I'm Learning all the time]

If using Amazon's FBA service, then doubling is what I do, for example a product costing me £5.00 (landed cost), I sell for £11.99 inc VAT (more if the market will sustain it)

Why? because Amazon take a large chunk, typically £2.50 ~ £3.00 on a sale (albeit that commission includes the delivery of the product), so for that £11.99 selling price, £2.00 goes to HMRC, £2.50 goes to Amazon, this leaves me with about £2.00~£2.50 profit on my original £5.00 outlay. It's important to emphasize, that this is using FBA, so that £2.00~£2.50 is pure profit...there are no other costs involved.

For ebay, it depends on whether you are offering free postage or not...if you are, then the markup will be broadly similar to Amazon's (as you'll be paying for the postage & you'll incur Paypal fees).

It's always alarming to see my gross profit vs. my pre tax profit... yikes (worse still, there's not much I can do about such costs...it's the high cost of being part of the marketplaces)

Hi Pish Pash,

If this is a Small parcel I think you are calculating the profit incorrectly I make it that you are only making £1.34 with that mark up which is pretty low, of course if that suits your business model thats cool, we usually work on 2.5 - 3 times cost trying to achieve 30% GP

 

[Pish_Pash]

Hi Pish Pash,

If this is a Small parcel I think you are calculating the profit incorrectly I make it that you are only making £1.34 with that mark up which is pretty low, of course if that suits your business model thats cool, we usually work on 2.5 - 3 times cost trying to achieve 30% GP

My stuff is mainly large letter format (not small parcel), I guess it boils down to how lean/efficient your own setup is as to what level of profit works for you (it's me & my wife & we do everything ourselves..). I'm happy with £3.00 net profit** on an item costing me £5.00 ...I'd prefer £4.00 net & if the market will sustain it, I'll ask that!

(**net profit here should be taken to mean how much money I trouser from the sale itself, not net profit as in at the year end how much I trouser after all costs of running the business are taken into account)

 

[I'm Learning all the time]

My stuff is mainly large letter format (not small parcel), I guess it boils down to how lean/efficient your own setup is as to what level of profit works for you (it's me & my wife & we do everything ourselves..). I'm happy with £3.00 net profit** on an item costing me £5.00 ...I'd prefer £4.00 net & if the market will sustain it, I'll ask that!

(**net profit here should be taken to mean how much money I trouser from the sale itself, not net profit as in at the year end how much I trouser after all costs of running the business are taken into account)

I still only make that £1.94 Gross Profit without taking into account the shipping to Amazon charge and the Storage fees that's in a category that charges 15% Referral fee mind you

 

[Pish_Pash]

£11.99 retail price, FBA item weight 90g (large letter format)

£1.44 referal
£0.82 pick & pack
£0.43 weight handling

Total of £2.69 in Amazon fees £1.99 in VAT = £4.69 lost to Amazon & HMRC, therefore I get £7.30 (for an item costing £5.00).... you are totally correct I'm not getting what I stated (but I overlooked that I normally add a little extra! i.e. I don't double, but I double & then add a bit ...the 'bit' depends on the product...typically an extra 10 to 20%).

therefore to revisit my earlier statement....if you want to bag circa 30% & if you are VAT registered, a better rough calculation would be your landed price x 2.3(ish)

(for me I'm prepared to accept lower margins selling via Amazon, because it removes so much of the labour intensive aspect of running my business)

On some lines, I trouser a whopping 300% (ok, it's a low cost item & the amount I get is about £2.00!) ...so as ever, you price at what you can get away with!

 

[I'm Learning all the time]

£11.99 retail price, FBA item weight 90g (large letter format)

£1.44 referal
£0.82 pick & pack
£0.43 weight handling

Total of £2.69 in Amazon fees £1.99 in VAT = £4.69 lost to Amazon & HMRC, therefore I get £7.30 (for an item costing £5.00).... you are totally correct I'm not getting what I stated (but I overlooked that I normally add a little extra! i.e. I don't double, but I double & then add a bit ...the 'bit' depends on the product...typically an extra 10 to 20%).

therefore to revisit my earlier statement....if you want to bag circa 30% & if you are VAT registered, a better rough calculation would be your landed price x 2.3(ish)

(for me I'm prepared to accept lower margins selling via Amazon, because it removes so much of the labour intensive aspect of runnig my business)

Some lines I trouser a whopping 300% (a low cost item) ...so as ever, you price at what you can get away with!

I agree with you, its what you can get away with... luckily we can usually get away with 2.5 - 3 times cost, I too love FBA for both the sales uplift and of course it comes into its own in November December when we just wouldn't be able to cope with the uplift in sales