1. Gross profit margin
After completing the cost calculation
, the seller can add the profit to the selling price of the product in proportion according to its own pricing strategy. The formula is as follows.
Product selling price = product cost × (1 + gross profit margin)
2. Promotional price reduction space
After calculating the price based on gross profit margin, we must also consider Product price reduction space. During store operations, we will submit some products for promotional activities. For example, a product plans to submit a promotion and reduce the price by 20%. In order to ensure that the gross profit of this product is not affected, the selling price needs to be adjusted when it is put on the shelves.
Product selling price = product cost × (1+gross profit margin)/(1-20%)
In addition, sellers can set free shipping conditions in their own stores, as well as multiple For multiple discounts, the discount given to buyers will be calculated into the product price. For example, the free shipping conditions for a certain store’s Malaysia site are: free shipping for two items, with a maximum free shipping limit of MYR 4. So if two products are set up with free shipping, the average price of each product will be 2 ringgits to make up for the reduced profit from free shipping.
3. Return rate and delivery failure rate
Sellers can calculate the number of orders based on their delivery failure and secondary sales failure in the past period of time (such as one month), as well as buyer returns. The number of orders returned to the seller’s warehouse is used to calculate the cost caused by the buyer’s return and delivery failure and secondary sales failure. The formula is as follows.
Proportion of buyer returns and secondary sales failure = (number of orders that failed to be delivered and could not be resold + number of orders returned by buyers and returned to the seller’s warehouse)/total number of orders
This ratio must be taken into account when calculating procurement fees, packaging fees, domestic express fees, international logistics fees, and payment fees, because the payment fees and international logistics fees for these orders will not be refunded to the seller. For example, the purchase cost formula after adding this ratio is as follows.
Purchase cost = price of purchased product × (1 + buyer’s return and secondary sales failure ratio)