In dropshipping, the calculation “I buy the product for 400 TL, sell it for 600 TL and earn 200 TL” is almost always wrong. Many expenses have to come out of that difference. In this guide we walk you through, in order, the items you need to factor in when setting your selling price.
1. Product cost
This is the dealer price you pay the supplier. At Çanta Bayim, the dealer price, the list price and the profit margin between them are shown for every product in the dealer panel.
2. Shipping fee
The cost of shipping the product to the customer. On marketplaces, this amount is usually deducted from your payout according to the marketplace’s shipping agreement; on your own channel, it is the supplier’s shipping fee.
3. Marketplace commission
Marketplaces charge a commission on the selling price that varies by category. Since commission is a percentage of the selling price, it rises as you raise the price. Check the current rate in your seller panel.
4. Return allowance
A portion of every batch of orders comes back as returns. With returns, the outbound and return shipping usually come out of your pocket. For example, if you expect 5 returns for every 100 orders, you should spread the shipping cost of those 5 returns across the 95 successful orders and add it to the unit cost.
5. Advertising cost
If you run ads, divide your total ad spend by the number of orders in that period to find the advertising cost per order. For new products, this cost is high at first.
6. Tax
The VAT included in the selling price does not belong to you; it is offset against the VAT on your purchase invoice. It is best to calculate profit on amounts excluding VAT. Income tax or corporate tax is then calculated on net profit.
Worked example
The figures below are only to illustrate the method; use your own product and channel figures.
| Item | Amount |
|---|---|
| Selling price | 750 TL |
| Product cost (dealer price) | − 380 TL |
| Marketplace commission (e.g. 20%) | − 150 TL |
| Shipping | − 60 TL |
| Return allowance | − 15 TL |
| Advertising allowance | − 40 TL |
| Remaining before tax | 105 TL |
As you can see, a gross difference of 370 TL drops to 105 TL after expenses. Working backwards from your target net profit when setting prices lets you eliminate loss-making products from the start.
Ways to increase profit
- Increase the basket size by offering a second product to the same customer; the shipping cost per product goes down.
- Give clear dimensions and material information in the description; returns will decrease.
- If you buy best-selling models wholesale and ship them yourself, your unit cost may drop.
- Direct your advertising to products that have proven they sell.
For a general profit calculation specific to bags, see our article on profit margins in bag sales, and to get started, see our bag dropshipping page.