Decide your target margin as a percentage of net selling price. Add up fixed per-unit costs (product, packaging, shipping, fixed fees, expected return loss). Add percentage costs (commission, ads). Then divide fixed costs by one minus percentage costs minus target margin. Confirm every fee in your seller agreement and rate card, then verify against actual settlements.
Step 1: Fix the margin you actually want
Most pricing errors begin with a vague target such as "30% margin". Decide what the number means before you touch a spreadsheet.
- Base: calculate margin on net selling price (excluding GST), not on MRP or the price the customer pays inclusive of tax.
- Level: use contribution margin, meaning what is left after product cost, marketplace fees, shipping, returns and ads, but before company overheads.
- Scope: set targets by category or SKU group, because return rates and fee slabs differ.
Write the target down as a percentage, for example 20%, so it can go straight into the formula later.
Step 2: List every cost between your price and your payout
A marketplace payout is rarely the selling price minus one commission. Pull the actual fee components from your seller agreement, the current rate card and a recent settlement report. Do not rely on memory or a competitor's number, as fee structures and slabs change.
- Commission: usually a percentage that depends on category and sometimes on price band.
- Fixed or closing fee: a per-order amount that hurts low-priced items more.
- Shipping or logistics fee: often depends on weight, zone or slab.
- Payment or collection charges: check whether they apply to your arrangement.
- Return-related charges: reverse shipping, restocking or damage deductions.
- Advertising and promotion contributions: including any discount funding you agreed to.
- Taxes on fees: confirm GST treatment on fees, and how TCS or TDS affects cash flow, with your tax adviser. Rates change, so do not hard-code them.
Split the list into two groups: costs that are a fixed rupee amount per unit, and costs that are a percentage of price. The formula needs this split.
Step 3: Use the pricing formula
Because commission and ads move with price, you cannot simply add them to cost. Solve for price instead:
Net selling price = Fixed costs per unit ÷ (1 − percentage costs − target margin)
- Add fixed per-unit costs: product cost, packaging, fixed fees, shipping, and expected return loss.
- Add percentage costs as decimals: commission plus ad spend plus any other percentage-based charge.
- Add your target margin as a decimal.
- Subtract that total from 1. If the result is close to zero or negative, the SKU cannot hit the target on this marketplace.
- Divide fixed costs by the result.
Then convert the net price into the listed price by adding GST at the rate applicable to your product, and check it against your MRP and discount strategy.
Step 4: Load returns and ads into the price
Returns and ads are the two costs most often left out, and they decide whether a healthy-looking SKU is actually profitable.
- Returns: estimate expected loss per unit sold, not per returned unit. Multiply your return rate by the average loss on a returned order (reverse shipping, damaged or unsellable stock, fees not refunded). Use your own last few months of data by category.
- Ads: treat planned ad spend as a percentage of sales. If a SKU only sells with heavy advertising, price it with that percentage included.
- Discounts: if the marketplace runs sales where you fund part of the discount, model the discounted price as a separate scenario with its own margin.
Keep a conservative and a base case. If the conservative case still clears your minimum margin, the price is safe to publish.
Step 5: Check that fees charged match fees agreed
Your price is only as good as the fee assumptions behind it. If the marketplace charges a higher commission slab, a wrong weight category or a duplicate fee, your real margin drops below plan even though your model was correct.
Each month, compare a sample of settled orders against your agreed terms: commission percentage, fixed fee, shipping slab and return charges. Tools such as MarketplaceMetrics by Fundle automate this by reconciling sales with settlements and flagging fees that differ from agreed terms, which also gives you evidence for recovery cases. Myntra Excel reports are reviewed today; coverage of other marketplaces is a scoping discussion.
Feed the effective fee rates you observe, not the headline rates, back into your pricing model.
Step 6: Set a price floor and a review routine
Calculate a floor price for each SKU: the lowest net price at which contribution margin is still acceptable, say break-even or a minimum you define. Share it with whoever runs promotions so discounts never go below it unnoticed.
- Recalculate when the marketplace revises its rate card, when your product cost changes, or when return rates move.
- Review slow SKUs where fixed fees take a large share of the price. Bundling or raising the price may work better than discounting.
- Keep one pricing sheet per marketplace, since fee structures differ.
Worked example
Illustrative example only. All figures and percentages below are assumptions for demonstration, not actual marketplace rates. Replace them with terms from your seller agreement and settlement reports.
| Item | Assumption |
|---|---|
| Product cost | ₹400 per unit |
| Packaging | ₹20 per unit |
| Fixed fees and shipping | ₹60 per order |
| Expected return loss | ₹30 per unit sold (10% return rate × ₹300 average loss per return) |
| Commission | 15% of net price |
| Ads | 8% of net price |
| Target margin | 20% of net price |
Fixed costs = 400 + 20 + 60 + 30 = ₹510. Percentage costs plus margin = 15% + 8% + 20% = 43%.
Net selling price = 510 ÷ (1 − 0.43) = 510 ÷ 0.57 ≈ ₹895 (excluding GST).
Check: commission ₹134, ads ₹72, margin ₹179, and ₹510 of fixed costs add up to roughly ₹895.
If the commission were 18% instead, the denominator becomes 0.54 and the price rises to about ₹944. A three-point change in commission needs a price increase of around ₹49 to protect the same 20% margin.
Questions and answers
Should I calculate margin on MRP or selling price?
Use net selling price excluding GST. MRP is a ceiling printed on the product, and the price the customer pays includes tax. Margin on net selling price reflects the revenue you actually earn, so it is the cleanest base for comparing SKUs and marketplaces.
Where do I find the correct fee rates for my account?
Check your signed seller agreement, the marketplace's current rate card, and recent settlement reports. Fees vary by category, price band and weight slab, and they change over time. Confirm the latest terms with your account manager rather than copying public or competitor figures.
How do I account for returns in my price?
Estimate expected return loss per unit sold: return rate multiplied by average loss on a returned order, including reverse shipping, unsellable stock and fees not refunded. Add it to fixed per-unit costs before applying the formula. Use your own category-level data from recent months.
How often should I revisit marketplace pricing?
Review whenever the marketplace updates its rate card, your product cost changes, or return rates and ad spend shift noticeably. Also review monthly against actual settlements, since real effective fees can differ from the rates you assumed when you set the price.