A product can sell above its supplier cost and still lose money. Marketplace fees, payment charges, packaging, delivery, advertising, returns and expected losses all reduce what remains from a completed order.
Build the cost of one realistic order before choosing the price. That gives you a contribution figure you can compare with fixed expenses and discounts instead of treating the gap between price and product cost as profit.
The formula below accounts for a percentage fee and a target contribution margin under stated assumptions. Then check discounts, fixed expenses and whether customers can compare your offer fairly.
Guide reviewed: October 8, 2026. Interface labels may vary by version, account and device.
Calculate one completed order before choosing the price
| Measure | Calculation | Use |
|---|---|---|
| Contribution per order | Revenue minus variable costs | Amount available for fixed expenses and profit |
| Contribution margin | Contribution divided by revenue | Compare at the actual selling price |
| Markup | Price difference divided by stated cost base | Distinguish from margin |
| Break-even orders | Fixed costs divided by contribution per order | Estimate volume under stated assumptions |
Build the cost of one completed order
- Calculate landed cost per sellable unit.
- Add packaging, delivery and fixed transaction charges.
- Identify percentage fees and the actual amount they apply to.
- Include expected advertising and returns without double counting.
- Keep fixed business expenses separate from order-level variable costs.
Start with landed product cost: the cost of obtaining a sellable unit, including relevant supplier shipping and other acquisition expenses. If a shipment contains damaged units, dividing by the total number ordered may understate the cost of the units you can actually sell.
Add packaging, delivery, fulfillment and fixed transaction charges. Use actual quotes for the package size and destination you expect. Free delivery to the customer is still a delivery cost for someone.
Estimate advertising and return losses where they are part of normal sales. As data becomes available, replace assumptions with your own results. Avoid counting the same refund or cost twice when reconciling the figures.
Percentage fees change with the price
A marketplace commission calculated as a percentage cannot simply be added as a fixed amount for every possible price. Confirm what amount the platform uses as its fee base; shipping, discounts and tax treatment can affect it.
For a simplified model, let C be fixed variable costs per order, f the fee rate charged on selling price, and m the target contribution margin. The price is:
Price = C ÷ (1 − f − m)
This assumes the percentage fee applies to the price used in the formula, that the costs included in C do not change with price, and that f + m is less than 1. A different fee base or tiered charge needs a different calculation.
A worked example
Suppose an illustrative order has $24 in product, packaging, shipping and expected acquisition or return costs. The platform charges 12% of selling price, and you want a 20% contribution margin before fixed expenses and tax.
The calculation is $24 ÷ (1 − 0.12 − 0.20), or approximately $35.30. At that price, the percentage fee is about $4.24, leaving about $7.06 after the $24 of other variable costs.
That remaining amount is contribution, not automatically net profit. It still helps pay hosting, subscriptions, rent or other fixed expenses not included in the order calculation. The example is a planning illustration, not a recommended price or fee rate.
Margin and markup answer different questions
Margin compares the amount remaining with sales revenue. Markup compares it with the chosen cost base. If the cost base is $50 and the price is $100, the $50 difference represents a 50% margin and a 100% markup, before any costs omitted from that base.
When discussing a target with a supplier or using a spreadsheet, label which measure you mean. A request for a “30% profit” is ambiguous unless the calculation and included expenses are clear.
Compare offers that customers can actually compare
Match quantity, dimensions, quality, included accessories and delivery terms when reviewing competitors. A three-pack with shipping included is not directly comparable with a single item whose shipping charge appears later.
If your workable price is far above equivalent offers, investigate sourcing, fulfillment or the product itself. A useful bundle or service can add value, but it needs a real customer benefit. Renaming the same product “premium” does not resolve a cost problem.
Plan for discounts and fixed expenses
Discount example: using the illustrative $24 cost and 12% fee above, a $30 selling price leaves $30 − $3.60 − $24 = $2.40 contribution, or 8%. A discount from the calculated price therefore changes the margin sharply. These figures are examples, not platform rates.
Recalculate the margin at the actual discounted price. A promotion can reduce contribution more quickly than expected while the supplier and shipping costs stay unchanged.
A simple break-even estimate divides fixed costs for the period by contribution per order. With $200 of fixed costs and $8 contribution per order, 25 orders cover those costs under the stated assumptions. Product mix, returns and changing acquisition costs can alter the result.
Review actual results regularly
Compare your forecast with completed orders, platform statements, advertising costs and returns. Keep tax treatment consistent and seek appropriate accounting guidance for your location when needed.
A price is workable when customers understand the offer and the completed sales support the business after its costs. Updating the calculation when fees, sourcing or delivery change is part of pricing, not a sign that the first price failed.
Pricing references and calculation checks
Check whether the formula fits your fee schedule
If the fee includes shipping, uses tiers or changes with discounts, calculate the actual charge separately. Round only after the calculation, then recalculate at the chosen published price. When contribution is zero or negative, the simple fixed-cost break-even calculation does not produce a workable sales target.