What is a fee ratio?
Your fee ratio measures your fees as a percentage of your revenue. A lower percentage means less of your revenue is spent on fees. A higher percentage means more of your revenue is spent on fees.
How is my fee ratio calculated?
Your fee ratio is calculated as:
Total fees / total revenue
For example, if your total fees in the period were 250 and your revenue was 1,000, your fee ratio would be:
250 / 1,000 = 0.25
Your fee ratio is presented as a percentage, so 0.25 becomes 25%.
How can I compare my fee ratio to industry averages?
Link My Books benchmarking feature allows you to compare your fee ratio with other businesses of similar size selling on the same channel.
On the bell curve, you will see the median, lower quartile and upper quartile figures. These represent how other businesses in your cohort are performing.
Your result is shown in comparison to these industry averages and is placed into one of the following 4 quartiles:
A lower fee ratio is better as this means less of your revenue is being spent on fees.
Tips to improve your fee ratio
Ultimately to lower your fee ratio you need to increase your revenue or lower your fees or both.
Some tips on how to do that are (written by Chat GPT):
Optimise Your Inventory
Some marketplaces charge higher storage fees for items that have been in their warehouses for longer periods. Reduce storage fees by removing older inventory or running sales to sell through it.
Optimise Your Packaging
Reducing your packing size and weight by 5-10% might just be enough to bring your item into a lower fulfilment fee tier thus saving you money of fulfilment fees.
Bundle Products to Save on Fees
Instead of selling individual items, consider bundling related products. This can help you reduce per-item fees, as marketplaces often charge lower fees for multi-item sales.
Utilise Fulfilment Services Wisely
If you use fulfilment services provided by the marketplace, compare the costs with third-party fulfilment options. Sometimes, outsourcing fulfilment to third-party providers can be more cost-effective.
Promote Your Own Website
Encourage customers to purchase from your own website by offering exclusive discounts, promotions, or loyalty programs. This way, you can avoid or reduce the fees associated with selling on third-party platforms.
Optimise Your Product Listings
Improve your product listings to boost visibility and sales. Higher sales volumes may qualify you for lower fees through volume-based discounts or promotions offered by some marketplaces.
Manage Returns Efficiently
Implement an efficient and cost-effective returns process. This can minimise return-related expenses, such as return shipping fees and restocking fees imposed by some marketplaces.
Monitor Fee Structures and Policies
Stay informed about changes in fee structures and policies on the platforms you use. Adjust your strategy accordingly to take advantage of any fee reductions or to mitigate the impact of fee increases.
Remember to regularly reassess your strategy and stay informed about changes in the terms and conditions of the online marketplaces you use to ensure you're optimising your cost structure effectively.