Percentage vs fixed markup for eBay listings: which protects your margin better?

What is the difference between percentage vs fixed markup?

The difference between percentage vs fixed markup is how your profit is added to the cost. A percentage markup adds a share of the cost: a 20% markup on a £10.00 item adds £2.00, and on a £100.00 item adds £20.00. A fixed markup adds the same amount of money to every item: a £3.00 markup adds £3.00 whether the item costs £5.00 or £150.00. Both are then grossed up for eBay fees to give the listing price.

Neither is right for every catalogue. Each behaves well at some price points and badly at others, which is why the most common answer in practice is a combination of the two with a minimum profit floor underneath.

How do percentage and fixed markups compare?

How do the two methods behave at different prices?

The best way to see the difference is to run both across a range of costs.

A hypothetical example

Example: compare a 20% markup with a £3.00 fixed markup on three items, using a hypothetical 12% fee rate for the arithmetic (check your real rates on eBay's selling fees page). Prices are (cost plus markup) divided by 0.88.

On the £4.00 item, the percentage method earns 80p, which one return or a small cost rise would wipe out, while the fixed method nearly doubles the price and may stop it selling. On the £90.00 item, the fixed method is very competitive but earns only £3.00 on a sale where a single return or damaged parcel could cost far more. In the middle, the two methods are close. The real choice, then, is about how you want your cheapest and dearest items to behave, since that is where the methods part company. Look at where most of your sales fall before deciding.

How fees interact with each method

eBay's percentage fees are charged on the whole sale price, so they grow with the price whichever markup you use. With a percentage markup, both your profit and the fee grow together as the cost rises. With a fixed markup, the fee keeps growing while your profit stays flat, so on dear items a larger and larger share of the buyer's money goes to fees rather than to you. That is not a reason to avoid fixed markups, but it is a reason to check what share of each sale you actually keep at the top of your price range.

Fixed per-order fees work the other way. A fixed fee is a large share of a cheap sale and a tiny share of a dear one. A pure percentage markup on cheap items may not even cover it, which is one more argument for a fixed element in the markup.

What are the risks of a pure percentage markup?

• Too little profit on cheap items. Small percentages of small costs are pennies. Fixed costs per order, such as your time, packaging or any per-order fee, can exceed the markup.
• Dear items priced out. A high percentage on an expensive item can put you far above competitors who use lower or fixed markups.
• Profit rises with cost, not effort. When a supplier raises the cost, your profit grows, which can push the price further from what buyers pay.

What are the risks of a pure fixed markup?

• Cheap items look expensive. A fixed amount that is fair on a mid-priced item can more than double the price of a cheap one.
• Dear items carry risk without reward. A return, a damaged delivery or a cost rise between checks on an expensive item can cost many times the fixed markup.
• No cushion for cost movement. If a dear item's cost rises 5% before your next check, a percentage markup has some room to absorb it; a small fixed markup may not.

What happens when costs move between checks?

Supplier prices move, and there is always some time between one reading and the next. Your markup is the cushion that absorbs a rise in that gap. A percentage markup gives a cushion that scales with the item: a 15% markup can absorb a cost rise of up to 15% before the sale loses money, ignoring fees. A fixed markup gives the same cushion in money for every item: a £3.00 markup absorbs a £3.00 rise, which is a lot on a £5.00 item and very little on a £90.00 one.

If your dear items are also the ones whose prices move most, a fixed markup leaves them exposed. Either add a percentage element for those items or check them more often.

Why do many sellers combine percentage and fixed markups?

A hybrid markup adds a percentage and a fixed amount together, for example 10% plus £1.50. The fixed part lifts the profit on cheap items to something worth having. The percentage part makes profit grow on dear items, so risk is covered as the money at stake rises.

Running the hypothetical example again with 10% plus £1.50 and the same 12% fee rate:

• £4.00 cost: profit £1.90, price £6.70.
• £20.00 cost: profit £3.50, price £26.70.
• £90.00 cost: profit £10.50, price £114.20.

Each price sits between the two pure methods, and each profit is meaningful. You can tune the balance: raise the fixed part if cheap items earn too little, raise the percentage if dear items feel underpriced for the risk.

Adding a minimum profit floor

Whichever method you use, a minimum profit floor sets the least you will accept per sale in money. If the markup would give less, the floor takes over. A floor is the simplest protection against selling cheap items for pennies, and it also catches cases where a cost reading comes in lower than reality. The eBay pricing formula guide shows how the floor fits alongside fees and fixed costs.

How should you choose and test a markup?

1. Group your catalogue by price. Cheap, mid and dear items behave differently, so look at each group separately.
2. Work out your costs per order. Include returns, packaging, time and any per-order fees. Your markup must cover them before it earns a profit.
3. Pick a starting method. A hybrid with a floor suits most mixed catalogues. A narrow catalogue at one price level may do well with one method.
4. Test on a group. Change the markup on one group of similar listings for a few weeks and compare profit, not just sales, against a group you left alone.
5. Use per-listing overrides. Products with unusual fees, returns or competition can have their own settings.
6. Review monthly. Fee changes, supplier changes and competition all shift the right markup over time.

Repricing software should let you set both parts. Dropizon reprices from live Amazon readings using percentage or fixed markup, eBay fees grossed up into the price, a minimum profit floor and per-listing overrides; the eBay repricer page explains the settings.

If you price from Amazon, the markup decides your profit, not whether your sourcing is acceptable. eBay allows dropshipping from a wholesale supplier, but listing an item and then buying it from another retailer or marketplace that ships directly to your buyer is not allowed under eBay's drop shipping policy. You stay responsible for delivery and for your buyer's satisfaction.

A markup checklist

• List your per-order costs and make sure every markup covers them.
• Compare percentage, fixed and hybrid markups on your cheapest, middle and dearest items.
• Set a minimum profit floor in money, below which no listing is ever priced.
• Gross up every markup for fees by dividing, not adding.
• Test changes on a group of listings and measure profit per sale.
• Use overrides for products that do not fit the general rule, and note why each one exists.