Net Margin is a measure of profitability. It is calculated by finding the net profit as a percentage of revenue.
If you sold an item for $100.00 and the total cost of the item to you was $60.00 your net profit is $40.00. We can also say that your Net Margin was 40% ($40/$100).
This help file will guide you through all you need to know about Net Margin Repricing in Repricer.com
Before you start
- You need to have a Repricer.com account. To find out how to create one, click here.
- You’ll need to be on the Repricer Ultimate or Extreme plan to access this feature. To find out more information, click here.
01 Understanding how Net Margin Repricing works.In this section, we'll have a deeper look at how Net Margin Repricing works in your Repricer.com account.
- Why are my costs changing?: Some of your selling costs, such as listing fees and VAT or sales tax, are variable; they change as your selling price changes. As a result, when the Repricer changes your price, your costs will also change.
- How does net margin repricing affect my max and min?: When you’re using net margin repricing you’re deciding to set your minimum and maximum against costs that are changing. Therefore, your max and min will change every time the Repricer changes your price. However, because you’ve input a minimum net margin you’ll always make a profit.
- Why your profit is protected despite your changing costs?: While some of your costs are variable (i.e. listing fees and VAT or sales tax) others are fixed, that is they remain constant regardless of what your price is. Unit cost, Shipping cost, and Pickpack cost are examples of fixed costs. Your minimum cost will never go beneath your total fixed costs + your variable costs + the minimum margin you’ve input.
- Why am I unable to enter my desired Net Margin: Net Margin % is the percentage of your selling price that is profit. This means that some values of Net Margin % are mathematically impossible. For example, you can't have a Net Margin % of 100%. In order to avoid selling at the wrong price due to incorrect inputs, you cannot input a margin of higher than 65% as your minimum.
02 How do you calculate variable costs?
In the example below, we’ll use a notional price of $24 to show how your variable costs of VAT (or sales tax) and sellers fees are calculated.
- Calculating VAT
Selling Price: $24
Vat (or sales tax) rate: 20%
Vat in $: calculated below
Price Before VAT: calculated below
It’s important to understand that the selling price is the Price Before VAT + 20% of the Price before VAT. Therefore, it would be faulty logic to say that the Vat is 20% of $24 or $4.80. Instead, we should note that the VAT rate has already been factored into $24 selling price. In this sense, our Selling Price of $24 is 120% of our Price Before VAT.
Let’s start by finding out what 1% of the Price Before VAT is. We can do so, by dividing the selling price by 120%
$24/120 = $0.20 (This is 1% of the Price Before VAT)
We can then multiply 1% of the Price Before VAT by 100 to find the total Price Before VAT.
$0.20 dollars * 100 = $20 (This is the Price Before VAT)
Next, we’ll subtract the Price Before VAT from the Selling Price to find the Vat in $.
$24 - $20 = $4 (VAT in $)
Selling Price: $24
Vat rate: 20%
Vat in $: 4
Price Before VAT: $20
- Calculating the selling fee
Amazon's selling fee (generally 15%) is calculated on the total selling price, that is the price including VAT.
Therefore the calculation will be identical to that of VAT, except that we'll substitute the 20% VAT rate for 15% selling fee.
Selling Price: $24
Selling fee %: 15%
Selling fee: $3.13
- Putting it together
The variable costs at a $24 selling price will be $7.13. Bear in mind, that the price is fluid, and therefore, with net margin Repricing these Min and Max numbers will change with the price.
To find out more about how to assign your Amazon rules to your inventory to start repricing, click here.
Interested in learning more about eBay Repricing Rules? Click here.