Commission on Different Product Categories

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Hello everyone. Welcome to this special training program of Learn Vern, where we are learning “How to sell effectively on E-Commerce?”

Today’s topic is “understanding the commission calculation offered by E-Commerce platform.”

Look friends, there are many E-commerce platforms that include various commissions and calculations. So, in this short training program, we will discuss all the information.

Now, you might wonder there are so many platforms out there, why are they taking commissions? On what basis are they taking commissions? This question might arise in everyone’s mind. So in this training program and this small session, we will discuss all this.

Let’s move forward and talk about “platforms”. So, there are different kinds of platforms. I already gave you a brief explanation regarding this previously. Ok friends.

Platforms are divided into the categories, “self-hosted, hosted, and online marketplace”.

Now look, in self-hosted you are the owner of your website, management, and all the other things. Okay. And according to that, you can earn more profit but when you go to an online marketplace, you will have to manage and sell according to their conditions. You will not have any control over your website. You just have to list your products, and they will have control over selling all the products. Hence, they take some commission from you. Yes. Look, I sold your product. Hence, I want some commission. 

Now, why are they taking a commission? So look friends, you have many products, and suppose a person comes to you. Let’s say I come to you and say “I will sell your 10 products every month”. “how much commission will you give me?” You will say, “sir I can give you 2%, 5% or 10% depending on the product” and the cost of the product. You can decide the commission based on the value of the product and the way you are selling it and according to this, you can say that yes, you have sold this product, so take this much commission.

In the same way, in the same way friends, the online marketplace promises to sell your product. How many products will they sell? Well, that depends on how much the customer values your product, and what is the demand? Also, how eager is the customer to buy your product? So, this depends totally on the customer. But all the marketplaces charges commission for selling your product. They might say, I helped selling your product, grant us some commission so that we can also run our business.

Well yes. So platforms like “Flipkart, amazon, Zomato” and many other platforms earn mainly through commissions. Therefore, we have added the topic of calculating the commission in this training program.

Now, “commission calculated on different product category”. Let’s talk about “commission calculation”. So, “commission plans are different for different categories”. Yes, friends. Every product has a different product category and depending on that, there are different commission calculations with respect to that platform. Okay…

I would like to show you a product category. Statista did a survey where they found out that the fastest-growing, product category is “consumer electronics”. I am not implying this by myself. There was a survey of ‘Statista consumer market outlook’ where they analyzed the results of “the products growing online sales fastest”, which includes “share of global E-commerce sales in selected product categories and increase over time”. They did the survey in “2017” and based on that they analyzed and assumed the possible increment that should happen for the year “2023”.  So there is more increment for the category “consumer electronics”, then “household appliances”, “apparel, beauty and personal care, eyewear, OTC pharmaceuticals, furniture, food” and many other categories. There will be an increment, in the upcoming year of 2023. When you see this same video in the next year, you will notice many other fastest-growing categories. The number keeps changing, depending on the “demand” and “supply”. Yes, it depends on “supply” and “demand”. How much is the demand for a particular product category, and how much demand is successfully satisfied through the supply?

Look, friends. In a previous topic… I explained to you that “supply” is directly proportional to “demand”. It is essential that the supply should be more with the increase in demand. And it works that way because that’s how the balance is maintained as they are equal and directly proportional to each other.

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Now let’s have a look at a small example. Have you heard the name pager? Think, think about it. Have you heard of such a name? Amongst all of you who are watching this video, there might be very few people, who are familiar with the name pager. Look, friends. Try and watch some old movies. You will definitely find an example of a pager. Now, what is a pager? So before mobile phones were invented, there was a pager technology through which people were able to exchange messages. You might feel weird to hear this. Sir, today we can simply text message anyone we want, but friends, pagers that were used previously,  have disappeared now. Why did it disappear? Because of no demand. Why did the demand end? Because of the invention of the mobile. Keypad mobile. Now you might say, Sir, who uses keypad mobiles in today’s times. So the first mobile that was invented and used were keypad mobiles and after the technology started advancing, smartphones were invented. The same smartphones that you hold right now. As soon as smartphones came into the market, the demand for keypad mobiles ended. So with advancing technology, there will be many more inventions. You might think, sir, what more can be invented than smartphones? Look out guys, there will be many more inventions, where you might not even need mobile phones. Yes. “Mark my word”. This will happen someday.

So “demand”. With increasing demand, supply also increases. When there is no demand, the supply will also stop.

So let’s look at some product categories through an example. “Amazon”. Friends, I am giving you an example of “amazon” because it is the most famous and number 1 website in E-commerce. Yes. So I am giving you a practical example of “Amazon”.

When you go to the website sell dot amazon dot in, you will see that Amazon has various categories and different prices for every category. And recently, they have made some ‘fee changes”. “Changes in Amazon.in (amazon dot in) fees effective October 26, 2021, 5:00 PM, mega offer”.

Effective from 26^th October, the commission charges, promotion charges, and referral fee charges have changed. Some charges have increased while some have decreased. Here amazon is implying that starting from a “2% referral fee”, you can create, your amazon seller account. Yes, you can create your amazon seller account and launch your products on amazon.

Let me take you to different product categories quickly where various percentages are involved.

Now, as soon as you click on that link, you will land on this page where you can see several different categories. Here, the main category is “media” which includes “books, movies, music, video games, video games- consoles and accessories, software products, video games online service, toys, toys- drones, balloons” etcetera. So these are the subcategories of media and each category has a defined fee rate that amazon will charge from depending on the category that you choose. If you are selling books, Amazon will charge “2% for an item”. When you analyze each category thoroughly, here amazon implies that if you are selling a book whose cost is less than 300, then I will charge a fixed cost that is 2%. Look here also, “300- 2%”, “300- 2%”, “300- 2%”. (With same voice)

Here you can notice that the starting charge for every category is 2%. Every category like “consumable, Softline, other hardlines, then CE/PC/wireless which includes monitors, laptop, camera battery” etcetera will have the same starting rate as “2%, to 6.5, 12” and friends, there are some categories for which amazon charges 20% fee rate. Now, how does this happen and who decides this? Look here, “30%” commission is also charged on some categories. So how, and by whom is this decided? So let me tell you guys, the internal management of amazon decides how much fees should be charged for a particular category, because they need to manage their business well. So, according to their business, they calculate the commission through product category decisions. Yes, go and check this website on amazon, and check if your product is amongst any of these categories and accordingly, check your price quotation and calculate the charges you will have to pay to amazon and how much will you save? (I hope you have understood so far).

Now let’s go back to our presentation screen. So friends, we just saw a practical example of amazon where we saw several different kinds of categories. And this is not the only platform in the world. There are many other platforms like “Flipkart, Myntra, then Paytm mall” and many other e-commerce platforms.

If you also want to analyze and check your product category and the commission you are paying for a product category on that particular platform, how can you do it? Just go to google and search “platform name, then for business or seller”. “how you can do it”. “Just search for this word”. So here in “platform” you can write “Myntra, Amazon, Pepperfry, ola, uber, or any platform depending on the product you are selling. So search for the platform and understand the commission for your product category.

 If you have any queries or comments, click the discussion button below the video and post there. This way, you will be able to connect to fellow learners and discuss the course. Also, Our Team will try to solve your query.

So, see you soon with the next topic in our next session.

Thank you very much.

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