ChannelAdvisor research confirms what you may have known for awhile: Marketplaces are hot right now and will continue to grow. We dare say they’ve become an essential avenue to grow profits significantly.
But it’s not as simple as flipping a switch and reaping the rewards.
Launching new marketplace channels takes work — and includes several fees you may not have considered. Could they be eating into your profits? It’s important to know what fees you’re paying, why you’re paying them and how they’ll impact your success long term.
Types of Marketplace Fees
There are different types of marketplace fees — and each channel has its own mix. In general, fees fall under the following categories:
Membership or subscription fees are those required to simply join the marketplace. Marketplaces like Amazon, Walmart, Target Plus, eBay and Etsy all offer free seller accounts, but they’ll only get you so far. If you want to add services like bulk listing or customization tools, you’ll need to upgrade to a paid account.
Listing (or insertion) fees are charges for every product you post on the marketplace’s site, regardless of whether or not it sells. These fees are pretty low per SKU but can add up to a significant amount depending on how many you list. Walmart Marketplace does not charge listing fees and Amazon is free to list up to a certain volume, but the marketplaces that do charge them often boast more selective, high quality catalogs.
Referral (or commission) fees are in addition to any listing fees and are assessed when an item sells. It is generally a percentage of the product price instead of a flat fee. Etsy charges a 5% “transaction fee” (assessed at checkout) across all items, while Amazon, Walmart, Target and eBay take a referral or “final value fee” that varies by product category.
Payment processing fees
Some marketplaces charge sellers to use their payment processing services. These may vary based on the merchant’s location (domestic or international) or buyer’s credit card type, but is usually a percentage of the subtotal. Whereas sellers and payment processors (e.g., Visa, Mastercard or American Express) usually work directly with each other, some marketplaces choose to handle the processing for their vendors for a fee instead.
Most marketplaces allow you to set your own shipping rates. You may opt to pass your exact shipping expenses on to the buyer, or encourage more sales by offering free shipping. This is different on Amazon, where standard sellers must abide by the marketplace’s category-specific shipping rates unless they upgrade to a professional account.
Fulfillment is up to each individual seller, but there are pros and cons to each strategy. In-house fulfillment can save you from paying an outside service, but it also means spending more time (and money) in processing and employee resources. Third-party fulfillment services like Fulfillment by Amazon (FBA), Walmart Fulfillment Services or other third-party logistics providers (3PL) handle it all for you, but they charge fees — and not always as a lump sum either. This may include long-term storage fees, removal order fees or even unplanned service fees.
ChannelAdvisor Helps You Balance Fees with Marketplace Success
No one likes fees, but they do serve a purpose. They allow marketplaces to offer you channel-specific perks, increase convenience and even bring more sales your way. The trick is choosing the channels with fee structures that best suit your needs.
ChannelAdvisor, a CommerceHub company, supports more than 370 channels. Our experts know the ins and outs of every marketplace and which ones are the best fit for your brand. If you’re looking for a way to expand beyond your own website, store or sole marketplace, we can ensure your successful expansion in 2023.
Want to explore on your own? Our Commerce Network makes channel discovery and onboarding easy by connecting sellers and marketplaces in one platform. The offering is free to ChannelAdvisor customers and gives you the information you need up front to make informed decisions about a marketplace’s selling categories, fees, marketing content and more. Contact us to learn more or request a demo with our team of e-commerce experts today to get started.