Profit margins in marketplaces represent a crucial factor in the online sales strategy of a brand that wishes to compete effectively in the online business world.
Often, a company’s decision to be present on these sales channels depends precisely on an in-depth analysis of the profit margins it could achieve.
Several factors influence this decision-making process: market competition, the specific type of product, the target country, and the potential management of returns.
What are the key factors in profit margin analysis in marketplaces?
- Price: The price must be carefully defined, taking into consideration the official price list of the target country and the acceptable degree of flexibility. Price flexibility allows for dynamic adjustments to achieve the desired margins.
- Expected return rate: This value varies based on the type of product and the destination country, representing a crucial element in evaluating the operational and financial efficiency of sales.
- Shipping costs: These vary depending on the type of product and the country of sale. Shipping costs must be integrated into pricing strategies to understand the overall effect on the cost borne by the customer.
- Logistics storage costs: These differ based on the type of logistics chosen and are often related to the volume occupied by products ready for shipment.
- Return costs: These also vary based on the type of product and the country of sale. It is necessary to consider whether the marketplace has specific return constraints, such as the need to provide a local return address and a maximum number of days to process refunds.
- Order and return management: Operational and logistical processes that need to be evaluated in terms of efficiency and associated costs.
- Marketplace commissions: These vary depending on the specific marketplace. Commission percentages fluctuate significantly, with Coin at 10% and Yoox at 22%. Zalando, for example, has a tiered commission system based on the type of product and different price ranges: €0 – €19.99, €20 – €49.99, €50 – €99.99, >€100.
- Commission reversal 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 Optimization of Profit Margins in Marketplaces
The sales strategy should begin with a clear vision of the objectives to be achieved, using these as a guide to define the actions to be taken.
By establishing a target margin, it is possible to proceed with the optimization of various parameters to achieve the desired result.
Once the values of the variables that allow obtaining the right margins are identified, the brand’s potential at that specific price on that particular marketplace is calculated.
This process involves a direct comparison with the top 100 products in the same category to determine the positioning the brand would achieve.
Profit margins in marketplaces: conclusions
Profit margin analysis in marketplaces requires an in-depth study of the market, consumer behavior, and competitive dynamics.
Conducting an accurate profit margin analysis is fundamental for those who wish to sell on marketplaces, as it allows companies to make strategic decisions, thereby increasing the chances of success.
Implementing a sales strategy based on a solid profit margin analysis allows for optimizing profits and improving the brand’s competitive position.
Marketplaces are complex channels to manage, so it is essential to approach them with a strategy aimed at optimizing and maximizing online success.
Having a reliable partner to handle these processes is a great advantage, as it simplifies the management of complexity.
Yocabè is the ideal partner for selling on marketplaces, managing your presence on these channels comprehensively. Contact us now for a personalized consultation.