Dropshipping on Amazon requires constant adaptation of working models due to constant updates.Usually these are “sticks in the wheels”, thus sellers using this business model always need to look for more suitable ways to conduct this business.
Why do we do this now
Dropshipping in 2016 (when dropkit was founded) and dropshipping now – differ significantly, and we constantly adapted our platform to ever updating requirements together with you. However, we got to the point when our current basic pricing model does not work well for significant part of our users.
First, lately many our users utilize models where basic fulfillment price is lower that the nominal supplier price. There are various ways to achieve that (individual discounts, custom agreements, gift-cards etc.). For this reason we recently added a feature to decrease the nominal fulfillment price so that the system can better reprice it and properly account for profits. At the same time, our earnings from such model are minimal to zero.
Second, a certain portion of the users in the system emerged that do not link fulfillment orders or link them with “zero” or “negative” profits. We very well see and understand all such maneuvers, and often the system auto-corrects it (where possible). At the same time, this causes damage to the whole eco-system, and this has to be stopped.
All such users utilize system’s resources – for repricing, monitoring, buyer communication, search, order shipping & tracking, analytics and more. This creates elevated system load that is felt by everyone, and this has become especially noticeable lately. Thus, to restore the micro-economic balance in our eco-system we need to course-correct the pricing model.We understand, that not everyone will like this (especially those who got used to pay close to nothing), however for now we just need to make this step for the greater good.
What will change
Starting next payment cycle (after March 15, 2022 for February 2022) profits will be calculated by a new formula.
Before: For each order – there was a basic rate of 10% from profits by linked fulfillment orders (accounting refunds). Progressive scale decreasing the basic rate to 5% based on the total profit:
- profit under $2,500 – basic rate 10%
- profit from $2,500 to $5,000 – basic rate 9%
- profit from $5,000 to $10,000 – basic rate 8%
- profit from $10,00 to $25,000 – basic rate 7%
- profit above $25,000 – basic rate 5%
After: For each order the fee is calculated by this algorithm:
Progressive scale of discounts up to 50% based on the total fee:
- fee under $250 – no discount
- fee between $250 and $500 – discount 10%
- fee between $500 and $1,000 – discount 20%
- fee between $1,000 and $2,000 – discount 30%
- fee between $2,000 and $3,000 – discount 40%
- fee above $3,000 – discount 50%
Whom it will affect
By our calculations in the last couple months:
- for about 60% users nothing will change
- about 15% of users will notice increase of under 10%
- for the remaining 25% users – the fee will increase more than 10% (and for some – very significantly!)
First of all, this will be noticed by users who link zero or negative fulfillment price orders. Regular users working on standard models should not notice any changes. The simplest way to check if the changes will affect you is to check your ROI on the Dashboard:
If your monthly average ROI is above 10% – you should not notice any changes!
Either way, this compensation model equalizes conditions for all users, thus we hope for your understanding and cooperation.