With the competitive nature of eCommerce, smart sellers should take any edge they can get. Saving even cents per item can help bolster your margins as you grow your volume and business altogether.
On the flip side of the coin, spending too much on customer acquisition could ruin your business. eCommerce is constantly pushing the limits of what’s acceptable when it comes to cost-per-acquisition, with examples like Blue Apron spending $400 to acquire a new customer.
Making smart choices about where you spend your money can help you increase your runway and gives you more resources in your toolbox. Plus, every seller knows to pay attention to profits.
Today, we’ll be talking about marketplace costs, including referral fees, fulfillment fees, and advertising fees so you can make the best choices for your business.
Cost per customer acquisition
There are a few components to customer acquisition, including advertising costs, referral fees, and whatever brand marketing you want to do externally.
Referral fees are like a commission that marketplaces take on each sale. For example, if Walmart has a referral fee of 8% for cell phones, so Walmart sellers only get 92% of every cell phone sold.
In addition to referral fees, Amazon and eBay also have other fees to take note of.
- Amazon referral fees range from 6-20%, with most sellers paying 15%. Amazon also has a minimum referral fee of $0-2 if the referral fee is under the minimum for that category. Finally Amazon has different subscription fees for Individual ($0.99 per item) and Professional sellers ($39.99 per month).
- Walmart referral fees range from 6-15%, with their cheapest category being personal computers at 6%.
- eBay referral fees range from 6-9% based on category. eBay also has an insertion fee per store type; basic ($0.20), premium ($0.10), and anchor ($0.05).
Among the three marketplaces listed above, Amazon’s fee structure has the most complex components and number of categories. Amazon’s percentages also skew high compared to the other two marketplaces. Walmart’s fee structure is the most straightforward, and eBay’s referral fees are the most affordable overall.
eBay referral fees place them at one of the most affordable marketplaces to sell on. However, we also have to think about the level of competition on these marketplaces, as it’ll determine advertising expenses.
Marketing and advertising fees
There are various advertising options in Amazon, Walmart, and eBay.
All 3 marketplaces come with some form of pay per click advertising, where you can post sponsored products and only have to pay if someone clicks through or makes a purchase. Since you can set your budgets, this is also a way to control your ad spend.
However, having less competition can help your money go further when it comes to advertising.
As with their fee structure, Amazon has the most options and typically runs the most expensive. One Deliverr seller shared that they got bids from Walmart Performance Ads at about ⅓ the cost of similar keyword bids they were running on Amazon Sponsored Ads.
So Amazon comes out as expensive in regards to their referral fees and advertising costs, due to the high competition. However, they make up for this with FBA, which comes with some of the most affordable fulfillment costs available.
With comparable referral and advertising fee ranges, much of your costs will come down to fulfillment, where Amazon FBA typically beats out the competition.
We did a cost breakdown of how much it would cost a seller to fulfill a cell phone case on Walmart 2-Day with Deliverr, Amazon Prime with FBA, and their own stores.
Overall, 2-day fulfillment is more expensive on other marketplaces than it is with FBA. The only issue here is that FBA doesn’t always play well with other marketplaces. Items arrive in Amazon-branded boxes, and multi-channel FBA comes with different fees and service levels from FBA for Amazon orders.
To combat high fulfillment fees while still staying competitive with fast shipping tags, we recommend partnering with Deliverr. You’ll get access to discounted Walmart 2-day rates, and we integrate directly into Walmart and eBay’s fast shipping programs. Calculate your fulfillment costs in our cost calculator.
Wrapping it up
Compared to Amazon, the overall cost of acquisition is higher in Walmart, eBay, and your own stores due to fulfillment, but marketing costs are lower due to lowered competition. Your own store will be the most expensive when it comes to fulfillment and marketing.
To give yourself the greatest competitive edge, we recommend diversifying across marketplaces as well as having your own store. Keep costs low by investing more in the marketplaces with lower cost per acquisition, and keep fulfillment costs low by using FBA for Amazon and Deliverr for Walmart, eBay, and your own Shopify stores.