Profitability · 5 min read
Calculating marketplace profitability: the costs to include
From the selling price to the amount left over: find the right costs, avoid counting them twice and understand what your figures measure.
In this article
The marketplace pays you after deducting certain fees. Other costs, such as shipping and buying the product, are paid separately. To understand what a sale earns you, you need to bring these amounts into the same calculation.
Here is how to bring together sales and costs for a given period, identify missing information and distinguish the amount left after a sale from your company’s profit.
Start with sales, not the payout
A marketplace may pay you an amount that already has commissions or refunds deducted. If you start with that payout and subtract the same commissions again, you count them twice.
Keep sales, cancellations, refunds and fees separate in your spreadsheet. Then compare the result with your payouts to understand any differences. A payment received later affects the timing of your cash flow, but does not, on its own, reduce what the sale earns you.
Keep order and transaction references so you can trace each amount and spot duplicates when importing data.
Decide how to handle VAT
For a business liable for VAT in France, sales excluding VAT must be kept separate from the VAT collected. For expenses, exclude only the VAT you can reclaim. Whether you can deduct it depends, among other things, on the supporting documents available and how the purchases are used. VAT charged on an invoice is therefore not automatically deductible. Conditions for deducting VAT, impots.gouv.fr.
Have your accountant confirm the rules you use, particularly if you sell internationally or fall under a specific tax scheme. Your spreadsheet helps you monitor the business; you still need accounting records and tax returns.
Group your costs without mixing them up
We suggest separating them into five groups:
| Cost group | What to include |
|---|---|
| Product | Purchase cost and the share of procurement costs allocated to the products |
| Marketplace | Commission actually charged and other channel fees |
| Logistics | Order preparation, packaging, shipping, storage and returns handling |
| Advertising and sales | Advertising and other selling expenses linked to the sales |
| Overheads | Staff, subscriptions, premises and other operating expenses |
The list will depend on your business. Amazon, for example, distinguishes between referral fees, fulfilment fees and optional services: the commission percentage alone is not enough. Amazon pricing.
Match each product sold to its reference in your internal catalogue. If you buy the product again at a different price, decide how to apply the new cost to future sales and how to handle historical data. A file update should not change past results without your knowledge.
What is left from a €100 sale excluding VAT?
Choose a tab to explore the example.
In this hypothetical French VAT example, €120 including VAT at 20% is €100 excluding VAT. The product costs €40.
Understand the €26 left in this example
Here is a hypothetical example for a sale in France, with no return or cancellation. The product sells for €120 including VAT, with an assumed VAT rate of 20%, giving €100 excluding VAT. Delivery is not charged separately to the customer. The expenses below exclude recoverable VAT where applicable.
| Item included | Amount |
|---|---|
| Sale excluding VAT | €100 |
| Product cost | −€40 |
| Commission charged | −€18 |
| Shipping | −€8 |
| Order preparation and packaging | −€2 |
| Advertising allocated using the chosen method | −€6 |
| Amount left after the costs included | €26 |
These figures do not represent a marketplace fee schedule. The five costs total €74, leaving €26 as this sale’s contribution towards the remaining expenses, including overheads. Bpifrance explains how contribution margin helps cover fixed costs. Break-even point.
If your spreadsheet uses the word “margin”, state which costs you have already deducted. The €26 in this example is not net profit: overheads and any other costs left out still need to be accounted for.
When an expense covers several channels, record how you allocate it. An estimated advertising cost per order should remain clearly labelled as an estimate, alongside a commission confirmed by the transaction statement.
Handle returns and missing data
When a customer returns an item, track the parcel and the refund separately: the amount refunded, any fees credited back, return shipping and the condition of the product. The cost of the return also depends on whether you can sell the item again.
Show missing information alongside the result: sales with no product cost, fees still to come and the date of the last import. Without a recorded purchase cost, a product can look far more profitable than it is.
Start with a short period and a few different orders: a straightforward sale, a discount, a partial return or an order containing several products. Once you can explain every amount, you can apply the same checks to the remaining sales.
PerfSell brings sales, costs and fees together to help you track what your business earns. How you interpret the figures also depends on the costs you enter and the information available. Explore PerfSell software.
Already have a calculation, but seeing your results decline? Read our guide to what to check when sales rise and margins fall.
Further reading
Sources used in this article. Illustrative examples are not client results.
