Amazon Repricer - What is ChannelAdvisor REALLY calculating !!
5 replies
Wed, 07/04/2012 - 11:40
 Hi Guys n Girls, I'm seeing this within the UK where VAT (Sales Tax) is used. This has been ongoing for a while between myself and people at ChannelAdvisor. So this is what I've found so far. The Amazon Repricer does NOT calculate any additional sales TAX or VAT on top of its repriced amount even though in your My Account > Company Information Section it states it does. But more worryingly, do you understand the differences between margin and mark up? According to ChannelAdvisor it's just a word, but this will explain my concerns. Within your Repricer rules it clearly states: Price Limits Limits prevent the Repricer from setting an item's price too low. Limits enforce a minimum margin for each item by using both the product cost and shipping price for each item. BUT upon speaking to various people I have now been told that the Repricer is calculating on a percentage above your cost price, which is mark up. Say I have a product that costs me 10p and I want to sell it through ChannelAdvisor at a minimum of £2.00 ex Sales tax. If the Repricer worked on MARGIN as stated I would need to use a 95% MARGIN ......... BUT if as I fear, the Repricer uses mark up then at a 95% MARK UP the sale price would be 20p, to achieve the required £2.00 I would need to use 1900% MARK UP. In a nutshell by assuming margin is calculated but mark up is used, on Amazon I would be paying to sell my item and making a negative gross profit and end margin. For those that don't understand the difference try this ...... http://www.calculatorsoup.com/calculators/financial/margin.php And then maybe then you'll realise you aren't actually protecting a minimum margin. I would be very keen to hear everyone's thoughts on this !! Pete |
Hi Peter,
First, where are you seeing a setting that claims repricer is adding VAT to the value being created? You are correct that it is not adding any VAT value to your prices, but I could not find any statement in either the repricer or account setup stating it would add VAT. Amazon and eBay require that you submit VAT inclusive prices and the repricer calculates accordingly; the VAT setting in ChannelAdvisor is a setting to adjust your prices after the transaction has occured - and either back-calculate your VAT or not - it has nothing to do with adjusting prices on the way out to a channel.
Margin vs. Markup - you are correct and found a 3 year old typo that slipped by when I originally wrote that, sorry for any confusion.
Thanks,
Jennifer
Hi Jennifer,
You may have slightly mis-interpreted what I was saying regarding the repricer and VAT.
What I saw was in My Account > Account Settings > Company Setup Section it states :
Company Information
Please update and confirm your company information. This information will be used by the system to generate emails to buyers and to calculate checkout information such as sales tax and shipping.
But there isn't actually a way in that section to denote you need to apply sales tax or VAT, therefore it is misleading that it will be accounted for in all transactions.
What brought me to posting on the forum was the difference of opinions I was getting from other ChannelAdvisor employees.
There seems to be too many assumptions being made right from the onset at Inventory level.
Ive been told by ChannelAdvisor employees that my Sellers Cost can be either INCLUSIVE OF VAT or EXCLUSIVE OF VAT, but cost is cost, your cost price is always less any sales tax or VAT.
This is what I got sent "We do not define the rule based on tax rates but based on the values you factor in or out so it is at your discretion whether you include tax or not in those seller costs, although most sellers do. "
Using a Seller Cost Price Excluding Sales Tax or VAT this then allows you to set an accurate mark up on top of your product cost, take into consideration your COST PRICE of Shipping and produce accurate and controllable margins.
Where the problem arises is that by using Exclusive of Sales Tax or VAT Seller Cost pricing, the Amazon Repricer uses an EX VAT/Sales Tax price and goes out and can drop your price to be competitive but no consideration of Sales Tax or VAT is done. So you would need to apply a business rule to add Sales Tax / VAT after the Repricer had run. Otherwise you could be running / selling at a loss by the time you take off fees and Sales Tax / VAT.
On the flip side if you keep your mark up the same, and Include Sales Tax / VAT with the Sellers Cost field, regardless of including Shipping Costs or not, you would be running at a loss. An adjustment of your Mark Up would need to be done, sometimes this needs to be doubled, but if a customer is working on the principle of margin this can have a huge impact.
This all comes back to the initial data you put in, and from talking to a few ChannelAdvisor people, I get the distinct impression that they probably have never sold anything in their lives, not understanding the difference between cost ex sales tax / vat also mark up and margin, and unfortunately, it's not just a typo, a typo would be margim or something like that. Stating that you are protecting your margin but actually calculating using mark up has huge implications for your customers, it is the difference between trading with a profit or trading running at a loss.
I understand and appreciate ChannelAdvisor is set up for multiple instances, tax regions, geographics but there does need to be definitive and accurate input, with accurate text associated to clearly state what is required. Making assumptions and leaving customers to figure it out for themselves is very dangerous.
Correct me if I'm wrong please, but it may be down to the fact that within the US sales tax is only charged by certain companies for certain states and is usually only applied at checkout. Therefore all pricing is exclusive of sales tax / VAT. But the issue in the UK is we have to display our prices inclusive of VAT, therefore for an accurate mark up to be stated the repricer needs to deduct sales tax / VAT off the other competing Amazon Sellers Prices first, at the moment it is competing against other sellers without any VAT consideration.
As an example I set up a product, stating a 35% mark up ( now I know its mark up and NOT margin) what the repricer did was reprice to 35% above my cost price so it gave me a retail price EX VAT that would have been put onto Amazon. So no VAT being charged.
I did set up a business rule to then add VAT on top of the repricing rule, but then that takes my Retail Price 20% above what the repricer generated, so in certain terms it was a pointless exercise.
I would be nervous that other businesses within the UK were using the Amazon Repricer not realising that they are actually trading at a loss.
I am still running some tests but as ChannelAdvisor makes assumptions on certain field data this could be a very dangerous situation.
Pete
This might make it easier.
Cost Price Mark Up Example product price shipping joint cost joint retail ex vat inc VAT Less Fee Fee Amount VAT removed VAT Amount VAT + Fee GP Margin
£92.99 35 125.54 5.00 97.99 130.54 156.64 137.41 19.24 130.54 26.11 45.34 £13.31 11.96%
£92.99 35 125.54 5.00 97.99 130.54 130.54 114.51 16.03 108.78 21.76 37.79 -£5.24 -5.65%
On the second line of figures (BOLD and underlined) the problem comes by not deducting VAT at repricing first what you think is 35% markup is actually only 17% mark up by the time VAT is removed, so by the time you deduct VAT and Seller Fees and you take out your cost of product and shipping cost (No Mark Up used to make it simple) you are actually selling at a loss while thinking you are using a 35% mark up.
Pete
Peter,
I haven't digested your entire post but wanted to respond to this quote quickly. This is the statement you copied from the Company Information settings:
"Please update and confirm your company information. This information will be used by the system to generate emails to buyers and to calculate checkout information such as sales tax and shipping."
This refers to the checkout transactions that ChannelAdvisor processes for you. Prior to last year this had included eBay, but as of today is only applicable to the Basic Webstore and Checkout Direct transactions. ChannelAdvisor does not process any transactions on any marketplaces - Amazon, eBay, or others - and has no control over the tax being charged at time of checkout for these transactions. Those charges (and whether they are additional or included) are between you and the marketplace and in terms of Amazon UK there is no facility to charge an additional fee; at this time outside the US, Amazon requires that your prices be tax/VAT inclusive.
-Jennifer
Hi Jennifer,
Maybe then the wording within the company setup needs to be clearer, better to avoid any confusion and leaving people having to make assumptions!
If Amazon requires your prices to be inclusive of sales tax / VAT then why is this being ignored by ChannelAdvisor? The Amazon repricer should therefore deduct VAT from all prices it uses that we are competing against, and then allow us to state a mark up that we want to achieve/protect against our cost price, and before exporting that amount to Amazon, add VAT back on. At the moment the Amazon Repricer is taking our mark up amount and exporting to Amazon without adding any VAT. Therefore if we set a mark up of 35% this then exports our product at cost with 35% on top, to Amazon. And no consideration whatsoever of VAT is taken. This could be dangerous if customers are unaware that VAT isn't added, or they calculate that a safe mark up is say 35% but in reality once VAT is deducted from a sale they only have a 17% markup. Plus if you add sellers fees into this equation, trading at a loss.
Pete