How marketplace fees eat your ecommerce profit

New sellers price like this: it costs me £10, I'll sell it for £25, that's £15 profit. Then the first settlement report arrives and the £15 has become £4.73. Nothing went wrong — that's simply what selling online costs. The sellers who survive are the ones who count every fee before setting the price, not after.

The fee stack, in the order it bites

• Referral / final value fee. The marketplace's cut of the sale price — typically 8–15% depending on category, and usually charged on the full amount the buyer pays, including postage. This is the big one, and it scales with every price rise.
• Payment processing. On your own website this is the card processor's percentage plus a fixed per-transaction fee. The fixed component makes low-priced items disproportionately expensive to sell — a 30p fixed fee is 3% of a £10 order but only 0.3% of a £100 one.
• Fulfilment. Whether it's a marketplace fulfilment service or your own postage, boxes and labels, getting the item to the buyer is often the second-largest cost. Don't forget storage fees if a warehouse holds your stock — slow-moving inventory quietly rents space every month. Watch volumetric weight too: carriers charge on whichever is greater, actual or dimensional weight.
• Advertising. If you pay for clicks, ad spend is a per-sale cost like any other. Work out the ROAS at which advertising merely breaks even — any campaign below it is buying revenue with your own money.
• Returns. The silent killer. A returned item usually costs you both postage legs, the payment fee (often non-refundable), repackaging or write-off — and the sale itself. A 10% return rate does far more than remove 10% of profit; our return rate calculator shows the true drag.

A worked example

A £25 item, £10 landed cost, sold on a marketplace at a 12% referral fee with £3.50 fulfilment and £2 average ad cost per sale:

Add an 8% return rate and the effective profit drops to roughly £4.50 a unit — before your own time, software subscriptions and business overheads. The "£15 profit" was never real; 18% net is what this product actually earns, and knowing that number is the difference between scaling a winner and scaling a loss.

The discounting trap

Fees make discounting more dangerous than it looks, because most fees don't shrink with the price. Cut the £25 item to £20 (a 20% discount) and the fulfilment, ad cost and cost of goods stay fixed — profit falls from £6.50 to about £2.10, a 68% drop. To merely match the old total profit you'd need to sell three times the volume. Before running a promotion, check the required volume uplift with the discount profitability calculator — the answer is frequently "this promotion cannot work".

Rules that keep sellers alive

• Price from a target net margin, not a gut markup — work the fee stack backwards from the selling price.
• Re-check fees quarterly: platforms revise fee schedules often, and always in one direction.
• Judge every product on profit after fees and returns; revenue rankings flatter your worst products.
• Treat postage as part of the price — buyers compare totals, platforms charge fees on totals.