Problem Statement
The challenge of setting a profitable minimum price
- Pricing on marketplaces is a high-stakes balancing act. Set your price too low and you eat into your margins. If you set it too high, you risk losing the buy box or dropping visibility.
- Many sellers don’t have a clear strategy for defining their minimum price, leading to lost profits, compliance issues, and even unintentional price wars.
- Your minimum price is the lowest amount you're willing to sell a product for. It should cover all your costs—including operational and financial expenses—and still provide a reasonable profit.
- This price sits apart from your broader pricing strategy. It’s the baseline that ensures your business remains sustainable.
- Minimum pricing becomes especially important when using dynamic pricing on marketplaces. It acts as the floor of your strategy, making sure you don’t sell below cost, even in highly competitive environments.
Why your minimum price matters: The impact on sales and profitability
- Ensures every sale remains profitable, preventing revenue loss.
- Helps navigate marketplace fees, commissions, and hidden costs effectively.
- Supports dynamic pricing strategies without selling below cost.
- Keeps you compliant with marketplace price policies, avoiding penalties.
- Helps maintain brand value and pricing consistency across sales channels.
Common mistakes to avoid while deciding your pricing strategy
❌ Not factoring in all cost elements – Many sellers overlook platform-specific fees and operational expenses when setting prices.
❌ Using a static pricing strategy – Market conditions change, and without adjusting your pricing, you could be undercut or left uncompetitive.
❌ Ignoring profitability in promotions – Running discounts or dynamic repricing without a defined minimum price can result in losses.
❌ Missing marketplace fees – Underestimating commission structures can eat into your margins.
How to define a profitable minimum price
A smart minimum price strategy starts with understanding all cost factors. Here’s what you need to calculate:
1. Product cost (Cost of Goods Sold - COGS)
Start by calculating the core cost of acquiring your inventory. This includes the purchase price, typically represented by the average purchase cost of current stock. On top of that, consider landed costs such as import duties, customs fees, and surcharges, which can significantly impact your margins.
2. Operational costs
These are the day-to-day costs associated with getting a product to the customer. Pick & pack fees cover the per-unit cost of handling and preparing items in the warehouse. Packaging costs vary depending on the product’s size, materials, and fragility. Don’t forget shipping costs, which are influenced by carrier rates, weight, package dimensions, and delivery destinations.
Operational costs also include middleware expenses, such as license or software fees, onboarding costs, and commissions tied to order volume or usage. These tools play a key role in managing marketplace operations efficiently.
3. Additional fees & overhead
To avoid margin erosion, build in buffers for indirect costs. A breakage and damage allowance helps cover potential losses due to product issues. Overhead allocation includes a fixed cost per order, factoring in customer service, partner fees, platform fees, translations, product images, and general handling. Also consider return costs, which vary by product type and affect overall profitability.
4. Data setup considerations in ChannelEngine
Ensure your cost price is available in a secure data feed so ChannelEngine can use it for pricing calculations. You can configure markups via pricing rules to reflect your desired margins. Make sure shipping cost rules are accurate by maintaining up-to-date weight and size information for each product.
5. Commercial strategy & pricing tiers
Define a minimum commercial threshold to avoid underpricing products, especially when compared to your own webshop. Build out pricing tiers to reflect different strategic goals—for example, clearance pricing for end-of-life stock, premium pricing for high-margin items, or competitive pricing for fast-moving goods
Step-by-Step Guide: Setting up your pricing fundamentals in ChannelEngine
Before we dive into the technical setup, it’s important to understand the different pricing terms we’ll reference in the steps and videos below.
Pricing glossary quick guide:
- Base price: This is your starting price—the price you want to sell your product for under normal conditions. It can include things like shipping, VAT, and commissions, and is often the reference point for your pricing strategy.
- Minimum price: This is the lowest price you're willing to accept, usually based on your costs (purchase price, shipping, marketplace fees, VAT). It's there to protect your profit margin.
- Minimum commercial price: This is an alternative minimum that’s based on your retail/catalogue price, not your costs. For example, it might be your retail price minus 10%. It's useful for protecting your brand value or positioning in the market.
Watch our 4-part video series with Robert Grundeken, Product Owner at ChannelEngine, and the mind behind our Price Management solution. In this series, Robert walks you through the key steps to setting up smart, scalable marketplace pricing in ChannelEngine:
1. How to set up your minimum price using price rules
In this video, Robert walks through the process of building your minimum price from the ground up, starting with your purchase price, then layering in margins, shipping, commissions, and VAT. You'll see how to stack pricing rules to calculate your final price effectively.
2. Defining your base price and minimum commercial price
What’s the difference between your base price and your minimum price—and how do you set them up in a smart way? In this video, Robert walks you through different pricing strategies, from using shipping cost fields to calculating a commercial minimum price. You’ll also see how the repricer selects the right minimum price to make sure you never sell below your threshold.
3. Applying different price rules to specific product selections
Get more advanced: Here, Robert dives into max price setup, commissions, VAT, and override rules for different product groups. You’ll learn how to tailor your pricing by product category or type for even more control.
4. Understanding marketplace fees and commissions
Don’t miss this one: Robert breaks down how platform-specific commissions and VAT structures (e.g., Amazon, Zalando) impact profitability. Learn how to set up fee categories and avoid miscalculations from progressive brackets or default fees.
Pro Tip: Leverage automation for smarter pricing
Manually updating prices across different channels can be time-consuming and error-prone. Every marketplace has its own rules, fees, and dynamics, making it difficult to stay consistent and profitable.
That’s where automation comes in. With ChannelEngine’s Price Management solution, you can automate your pricing logic to ensure every product meets your minimum profitability threshold. You define the strategy, and ChannelEngine applies it consistently across all your connected marketplaces.
- Automate price calculations to prevent selling below cost
- Apply your pricing strategy at scale without manual work
- Manage pricing across all marketplaces from one central platform
With automation doing the heavy lifting, you stay profitable, competitive, and fully in control!
