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You can simply multiply your estimated revenue * .07, and see exactly how much you pay in fees. You'd have to be earning quite a lot before it becomes worth bu
by johnrob 19y ago
You can simply multiply your estimated revenue * .07, and see exactly how much you pay in fees. You'd have to be earning quite a lot before it becomes worth building the website in house.
Here is something else to consider: If you make a million/year, you pay 70K/year for the whole shopping website. Now, if I were earning that much, I'd rather spend my time becoming a 2 million/year business than saving 70k.
Perhaps there are equivalent products that take less money, and if the two are really apples to apples, one might pick the lower commission rate. However, if amazon were the only one out there, I think the fees could be justified for a large number of customers.
- joshwa 19y agoBut what if your markup wasn't all that high to begin with? That's 7 points off your gross margin, which is nothing to sneeze at. Assuming a 30% gross margin-- to get that $2m, you'd have to spend $1.54m in COGS, for a gross profit of $462k. Add the 70k in amazon fees, and that's starting to seriously affect your balance sheet.
- johnrob 19y agoVery good point. The pricing model probably assumes a high (at least 2x) gross margin. I've heard that specialty goods (i.e. made by small shops) tend to have high margins.
- SwellJoe 19y ago7% is freaking huge. I cringe when I see our credit card processing fees, and they're only about 3%. I'm sure they'll sell a lot of this service, because they're Amazon, but jebus, that's some crazy high fees.