Why the listed price is not your revenue
When a customer pays ₹599 for your product, that amount never lands in your account. A marketplace deducts a commission, shipping, payment-collection and fixed fees, adds GST on those fees, and holds back tax. What finally settles to your bank is often 25–45% lower than the sticker price. Profitability is decided by what is left after every one of those deductions — not by the headline price.
The full cost stack of one order
Before you can compute margin, list every rupee that leaves your side for a single unit. A realistic stack looks like this:
- Product cost (COGS): what you paid the manufacturer or wholesaler per unit, including your inward GST where it is not creditable.
- Inbound + packaging cost: transport to your premises, the polybag/box, tape, bubble wrap and the printed label.
- Marketplace commission: a category-based percentage of the selling price.
- Shipping / weight fee: charged by weight slab and delivery zone (local, regional, national).
- Collection / payment-gateway fee: higher for cash-on-delivery than prepaid.
- Fixed / closing fee: a flat per-order charge on many platforms.
- GST on marketplace fees: 18% is added on top of the fees above.
- Returns / RTO provision: an averaged cost for orders that come back (covered in the returns guide).
- Ad / promotion spend: if you run sponsored listings, the per-order share of that budget.
The core formulas
Net profit is simply what settles to you minus everything you spent. Margin expresses that profit as a share of the selling price.
The "settlement amount" already has commission, shipping, collection, fixed fees and GST-on-fees removed by the marketplace, so you do not subtract those a second time.
Margin vs markup — they are not the same
Sellers confuse these constantly and it costs them money. Markup is profit as a percentage of your cost. Margin is profit as a percentage of the selling price. The same rupee profit gives a smaller margin number than markup number.
Example: cost ₹100, sold for ₹150, profit ₹50. Markup = 50%. Margin = 33.3%. If you target a 40% margin and apply 40% as markup, you will under-price and lose money. Decide which one you mean and stay consistent.
A worked example
A kurti listed at ₹599, prepaid order, shipped within the region:
| Line item | Amount (₹) |
|---|---|
| Selling price (customer pays) | 599 |
| Commission (assume ~10%) | −60 |
| Shipping / weight fee | −65 |
| Collection + fixed fee | −25 |
| GST on fees (18%) | −27 |
| Settlement to bank | ≈ 422 |
| Product cost (COGS) | −210 |
| Packaging | −12 |
| Return provision (averaged) | −40 |
| Net profit | ≈ 160 |
Net profit ₹160 on a ₹599 price is a 26.7% net margin — healthy. But notice that the same product sold as cash-on-delivery with one return in five orders can drop that to single digits. The margin lives in the deductions, not the sticker.
How often to recompute
- Whenever a platform revises its fee or weight slabs.
- When your supplier cost or packaging cost changes.
- When your return rate shifts by more than a couple of points.
- Before every promotion or price drop — a discount eats margin faster than it eats price.
Once you know the formula, the slow part is gathering current fees for each platform. That is exactly what the eKIMAT seller price calculator automates — enter cost and target margin, and it back-solves the price for Meesho, Flipkart and Amazon with their fee structures applied.