Marketplaces offer an abundance of options for sellers, but navigating their fee structures can be a bit challenging. The TikTok Shop and Facebook/ Instagram Shopping are quickly gaining on Amazon. Understanding platform fees is crucial for setting competitive prices and maximizing profits. This article looks into the fee structures of three popular marketplaces: Amazon, Instagram/ Facebook Shopping, and TikTok Shop. We’ll unpack their pricing models, highlighting key differences and exploring the benefits each platform offers.
TikTok Shop Fees
Once considered the new kid on the block, TikTok Shop has since exploded in popularity, offering a unique blend of social engagement and seamless purchasing. Imagine a shopping mall built directly into the TikTok app. That’s essentially what TikTok Shop is. This platform allows sellers to create short, engaging videos showcasing their products, with clickable links directing viewers directly to a product page within TikTok Shop to complete their purchase. The sellers can leverage the TikTok Shop Affiliate program, where they find and collaborate with influencers to reach new audiences, grow their brand and boost sales. For brands with a focus on visual storytelling and a younger demographic, TikTok Shop presents a dynamic platform to tap into a highly engaged user base.
The TikTok Shop seller fee system may seem a bit complicated to beginners but it’s actually quite simple. In essence, there are commission fees applicable to Southeast Asia markets, and referral fees for US only, which combine marketplace commissions and any transaction fees into a single one. Finally, there are shipping fees for those using TikTok Shop Shipping through eligible logistic services providers. TikTok Shop has terrific upside for brands, but it can be a little complicated to run successfully. Most brands use a TikTok Shop Partner to have the most success.
Marketplace Commission Fee
The Marketplace Commission Fee is a fee deducted after an order is successfully delivered to a customer. There have recently been changes to the fee structure, which used to involve a flat commission fee. Since April 2024, the commission fees for TikTok Shop are based on the product category, with each category having slightly different rates representing a certain percentage of the total sale amount.
The fee rates for electronics go from 2.5% to 4%, fashion, home and living are up to 4%, jewelry is 4%, sports and outdoor items are 4%, and so on.
The formula for the Marketplace Commission Fee is:
Marketplace Commission Fee = (Item price – Seller discount) * Fee rate
Transaction Fee
The Transaction Fee is a fee deducted after an order is successfully delivered to the customer. It is a fee charged for processing the order and it applies to all orders placed through TikTok Shop. This fee too has undergone a change: it used to be a flat 0.30% fee and now it’s 2.16% of the order value.
Referral Fee
The TikTok Shop Referral Fee is a fee applied in the United States. It is a consolidated fee structure that represents a combination of marketplace commission fee and transaction fees. All costs of selling through TikTok Shop are therefore integrated into one fee, which significantly simplifies and streamlines the experience. The fee applies to all qualified transactions and does not include shipping and tax fees.
There has been a significant update to the TikTok Shop Referral Fee policy in 2024. The gradual fee increase will start on April 1 when the referral fee rate on all qualified sales will increase to 6%. Then, starting from July 1, the fee rate will increase to 8%.
The referral fee can be calculated following this formula:
Referral Fee = Referral Fee Rate * (Customer payment + Platform discount – Tax)
Facebook and Instagram Shopping Fees
Leveraging the immense reach of the Facebook social network, Facebook Shopping and Instagram Shopping allows brands to connect directly with targeted audiences. By integrating your product catalog with your Facebook page, you can set up a storefront, and showcase products within user feeds and stories, driving traffic directly to your online store or enabling purchases directly through Facebook Shops.
Listing and Membership Fees
The great thing about the platform is that it charges no listing fees, nor membership fees for the Facebook Shops. Anyone with a Facebook account can join the marketplace with no monthly subscription fees or pay upfront charges to start selling. However, there’s a range of other fees that sellers need to incur. Here are the most important ones:
Selling Fees
For Facebook Shopping, the selling fee is 5% or a minimum of $0.40. Specifically, if you are selling products that cost $8 or less, you will pay the flat fee of $0.40 per product. For anything more expensive, the fee will be 5% of the product cost.
This only applies to products sold through Facebook and Instagram with shipping. The fees do not apply for local pickup. Also, bear in mind that fees are applied to each individual product shipped, so, whenever possible, you should try to ship products together and reduce the fees.
Chargeback Fees
The chargeback fee for products sold through Facebook Marketplace or Instagram Shopping is currently $20 alongside the price of the product. A chargeback means the customer is disputing the payment with their bank or credit card company. When this happens, Facebook informs the seller of the chargeback and automatically charges the fee from the seller’s account. The seller then has ten days to respond and potentially dispute the chargeback.
Shipping Fees
Unlike Amazon, Facebook does not operate a fulfillment center of its own. Instead, each seller is responsible for shipping and handling of the items sold. In that sense, there are no predefined shipping fees that sellers pay to the platform. There are, however, prepared shipping labels, which are only available for certain merchants. For the majority of sellers, they can choose between setting a shipping fee that will be included in the price or charging the customer directly for the shipping fee.
Ad Fees
Ad fees are of course fully optional as no seller is obliged to run ads through Meta’s advertising platform. However, Facebook ads are an incredibly powerful tool for reaching new audiences, growing the customer base and increasing your shop revenue, so they’re definitely worth considering. To make the best of this opportunity, do not hesitate to get in touch with GrowMojo, a Meta Preferred Facebook Agency with an impressive track record in this field.
Amazon Fees
A titan in online retail, Amazon boasts a massive customer base exceeding 310 million active users worldwide. This translates to immense sales potential, with established fulfillment infrastructure Fulfillment by Amazon (FBA) offering sellers a convenient solution for storing, packing, and shipping products. However, Amazon’s fee structure can be complex, with per-item referral fees varying by product category, along with additional closing fees and potential storage fees. Despite the fees, Amazon offers unparalleled brand recognition and a vast audience, making it a powerful platform for established sellers with competitive pricing and a robust fulfillment strategy.
Amazon Selling Plans
Amazon offers two selling plans, each with a specific set of tools and services.
- Professional Plan: Most sellers choose this plan because it allows them to use a larger toolset to help them grow their business. This plan currently costs $39.99/month.
- Individual Plan: This plan is suitable for small-scale sellers who don’t plan to exceed 40 products sold per month. This plan costs 0.99/month.
Referral Fees
This is where things become complicated. The referral fee represents the percentage of the total price or a minimum amount, whichever is higher. The total sales price includes shipping, as well as gift wrapping charges. The percentage itself is hard to define, as it depends on the product category and can vary broadly, and there’s a minimum amount of $0.30 set for referral fee on all categories. In general, the referral fee for Amazon ranges from 5% to 15% based on your product category.
Roughly speaking, home appliances have a lower fee than jewelry, and the highest fee is for Amazon device accessories.
Fulfillment (FBA) Fees
If you plan on selling through Fulfillment by Amazon, the fees are primarily based on the product’s physical characteristics, specifically the size and weight of an item. Larger and heavier fees, logically, have higher fees. The fees include the costs of picking and packaging, shipping and handling, as well as customer service and returns. The fees are divided into Apparel and Non-Apparel. The lowest non-apparel fee is for small standard and is currently $3.06, while the lowest apparel fee is $3.27.
Fees for Media Items
There’s a fixed closing fee for media items sold through Amazon, like books, DVDs, etc. This fee, which is the same for all items, is added on top of the referral fee.
Additional Fees
If you exceed a certain number of active non-media items listed, you will have to pay a high-volume listing fee. Then there are storage fees for FBA which are calculated according to the volume of space your inventory occupies in the company’s fulfillment centers. These fees are calculated monthly.
Marketplace Fees Breakdown
As we saw, the fee structures applied to Amazon, Facebook and TikTok are more complex than a single fee, so it’s impossible to say which platform is the cheapest for sellers.
Still, a rough marketplace fee breakdown would go something like this:
Amazon: Ranges from 5% to 15% (category dependant), minimum $0.30
Facebook Shopping: Flat 5% for items over $8.00, $0.40 for items under $8.00
TikTok Shop: Flat 6% and increasing to a flat 8% after July 1, 2024.
Of course, these are not the only costs you will incur if you decide to sell your products through one of these marketplaces. There may be shipping fees, taxes, chargeback fees, and so on.
Evaluating the seller fees on Amazon, Facebook, and TikTok Shop reveals distinct advantages and considerations for each platform. Amazon, with its comprehensive infrastructure and vast customer base, justifies its more complicated fee structure and generally higher fees through unparalleled reach and robust support for sellers. Facebook, on the other hand, offers more moderate fees, appealing to sellers looking to leverage social commerce and direct engagement with consumers, but it may lack the extensive logistical support that Amazon provides. TikTok Shop presents an attractive option with its unique potential for viral marketing. Either way, each platform offers unique opportunities, and a strategic approach can optimize profitability and market presence across these diverse selling channels. If you need any assistance setting up shop, especially on TikTok, reach out to GrowMojo today!
