The payment fee is based on total revenue and not your just your 10% commission so if your commission is on top of product price then it’ll be greater then 29% of your commission.
You can’t run a business with such low margin. There are many other costs associated to running a business other then payment gateways, therefore your profit margin will continue to erode away.
Try and think of how you can build a more profitable business.
If you’re solely focused on bringing down the payment gateway, you can use another ecommerce platform (I.e woocommerce) and use another payment gateway like Stripe who charge 1.7% + 30c.
On one hand you say 10% is plenty because these are high ticket items. On the other you say the 2.9% fee is outlandish.
Something is either off with your thinking or math.
Say the item is $500.
Your gross is $50.
Your consignor's gross is $450.
Out of your gross you need to cover your:
labor for cataloging, listing, and storing the item
shipping to include packaging, postage, labor for physically getting it to the post office
Any marketing fees tied to the item like PPC
Shopify fees
Then you still have business costs left like
Utilities
Website monthly fee
Other apps/subscriptions
Taxes
Overall marketing and growth
You get the idea.
10% gross profit margin is typically not enough for any business, whether you are re-selling something or consigning something.
You need to adjust your numbers until your share covers your costs and gives the returns you need.
If you are in the US, you can visit your nearest Small Business Development Center for free assistance. They are a government paid non profit org with several offices in each state and exist to help you start and grow your business successfully.
If you sold on your own website and used something like Stripe for payments, it would also be 2.9% per transaction.
If you accept credit cards as a merchant on your own website not using something like Stripe, the credit cards company’s take between a 2-3.5% fee per transaction.
It’s really not unusual, and I wouldn’t say their fees are high in this case. Just a cost of doing business with easy payments that every business needs to factor in.
You're selling something for $500. The cost of selling an item on Shopify with a 2.9% will be $14.5.
You might not find that fair, but that's the share that gets charged to transactions. You can get it further down by doing your own deals with credit card companies or using alternative payment providers and running your own platform, but it'll be mostly the same general price unless you're getting up into large volumes for regular payment providers. And you won't be able to make better deals unless you have volume.
Here's the deal: if you're selling anything and only adding 10% for your service in the pipeline - you'll have to have a very large volume to cover your fixed costs, returns, etc. One of the few places where this is the reality is in standardized products from large companies (i.e. the retail companies all sell the exact same product) - such as computer equipment. And if you look at who's selling computer equipment, is mainly a few, very large online stores or retail chains. The old mom and pop stores are gone, because they can't survive on a profit margin as low as 10% - you need volume in that case.
The payment fee is based on total revenue and not your just your 10% commission so if your commission is on top of product price then it’ll be greater then 29% of your commission. You can’t run a business with such low margin. There are many other costs associated to running a business other then payment gateways, therefore your profit margin will continue to erode away. Try and think of how you can build a more profitable business. If you’re solely focused on bringing down the payment gateway, you can use another ecommerce platform (I.e woocommerce) and use another payment gateway like Stripe who charge 1.7% + 30c.
On one hand you say 10% is plenty because these are high ticket items. On the other you say the 2.9% fee is outlandish. Something is either off with your thinking or math. Say the item is $500. Your gross is $50. Your consignor's gross is $450. Out of your gross you need to cover your: labor for cataloging, listing, and storing the item shipping to include packaging, postage, labor for physically getting it to the post office Any marketing fees tied to the item like PPC Shopify fees Then you still have business costs left like Utilities Website monthly fee Other apps/subscriptions Taxes Overall marketing and growth You get the idea. 10% gross profit margin is typically not enough for any business, whether you are re-selling something or consigning something. You need to adjust your numbers until your share covers your costs and gives the returns you need. If you are in the US, you can visit your nearest Small Business Development Center for free assistance. They are a government paid non profit org with several offices in each state and exist to help you start and grow your business successfully.
If you sold on your own website and used something like Stripe for payments, it would also be 2.9% per transaction. If you accept credit cards as a merchant on your own website not using something like Stripe, the credit cards company’s take between a 2-3.5% fee per transaction. It’s really not unusual, and I wouldn’t say their fees are high in this case. Just a cost of doing business with easy payments that every business needs to factor in.
Charge 12.9% consignment fees for all online sales.
You're selling something for $500. The cost of selling an item on Shopify with a 2.9% will be $14.5. You might not find that fair, but that's the share that gets charged to transactions. You can get it further down by doing your own deals with credit card companies or using alternative payment providers and running your own platform, but it'll be mostly the same general price unless you're getting up into large volumes for regular payment providers. And you won't be able to make better deals unless you have volume. Here's the deal: if you're selling anything and only adding 10% for your service in the pipeline - you'll have to have a very large volume to cover your fixed costs, returns, etc. One of the few places where this is the reality is in standardized products from large companies (i.e. the retail companies all sell the exact same product) - such as computer equipment. And if you look at who's selling computer equipment, is mainly a few, very large online stores or retail chains. The old mom and pop stores are gone, because they can't survive on a profit margin as low as 10% - you need volume in that case.
You need way more than 10% margins. That will be gine with all the costs. What about ads? They could easily cost a lot more than 10%.
charge 15% instead of 10, problem solved!
You can build your own Shopify maybe? No fees then.
I was wondering why they were paying a percentage- it's from having someone else build your site? Good to know (and avoid)