Margin analysis in marketplaces is a crucial factor in the online sales strategy of a brand wishing to compete effectively in online business.
Often, in fact, a company’s decision to attend these sales channels depends precisely on athorough analysis of the margins it would be able to achieve.
There are several factors that influence this decision-making process: competition in the market, the specific type of product, the country of destination, and the possible handling of returns.(link to guide)
What are the key factors in margin analysis in marketplaces?
- Price: Pricing must be carefully defined, taking into consideration the official price list of the target country and the degree of flexibility acceptable. Price flexibility allows dynamic changes to achieve the desired margin.
- Expected percentage of returns: This value varies by product type and country of destination, representing a crucial element in assessing the operational and financial efficiency of sales.
- Shipping costs: They vary by product type and country of sale. These expenses need to be integrated into pricing strategies to understand the overall effect on the cost incurred by the customer.
- Logistics storage costs: These differ according to the type of logistics chosen and are often related to the occupied volume of products ready for shipment.
- Return charges: These also vary by product type and country of sale. You should consider whether the marketplace has specific constraints on returns, such as the need to provide a local return address and a maximum number of days to make a refund.
- Order and return management: Operational and logistical processes that need to be evaluated in terms of efficiency and associated costs.
- Marketplace fees: They vary according to the specific marketplace. Commission rates vary widely, with Coin at 10 percent and Yoox at 22 percent. Zalando, for example, has a commission system stratified by product type and different price ranges: 0 – €19.99, 20 – €49.99, 50 – €99.99, >€100.
- Reversal of commissions on returns: Some marketplaces consider a partial reversal when a product is returned by customers. This is an important factor to consider when defining costs.
Sales strategy and margin optimization in marketplaces
The sales strategy must begin with a clear vision of the goals to be achieved, using these as a guide to define the actions to be taken.
By establishing a target margin,optimization of the various availableparameters can be carried out to achieve the desired result.
Once we have identified the values of the variables that allow for the right margins, we proceed to calculate the brand’s potential at that specific price on that particular marketplace.
This process involves a direct comparison with the top 100 products in the same category to determine how well the brand would rank.
Conclusions
Margin analysis in marketplaces requires a thorough study of the market, consumer behavior and competitive dynamics.
Performing anaccurate margin analysis is critical for those wishing to sell on marketplaces, as it enables companies to make strategic decisions, thereby increasing the chances of success.
Implementing a sales strategy based on sound margin analysis allows you to optimize profits and improve your brand’s competitive position.
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