I'm in the business planning stages of an apparel site that will sell
clothing and accessories for men and women. I will not carry any
inventory. my site will just process orders and I will pass those
orders on to a retail partner or manufacturer for order fulfillment. A
good example of this model is the Amazon.com and Nordstom
relationship. Amazon.com takes the order and passes it along to
Nordstroms for fulfillment (unlike the standard linking or affiliate
arrangement).

My question is; What percentage of each sale should I expect as a
commission on this type of transaction?

I'm assuming since my site will be passing on orders, not leads, that
the commission would be quite a bit higher than that of an affiliate.

Look forward to the response.

Hello -

Considering your arrangement is like Amazon, and Amazon is the
absolute premier online leader of this commission arrangement, their
revenue model would be the best one to mirror.

"Amazon.com is able to generate gross profit margins of at least 75
percent on the [6%-15%] commissions it charges retailers, according to
an estimate by Paul Keung, an analyst at CIBC World Markets.  Keung
expects Amazon.com to report net income of $93.3 million, or 22 cents
a share."(1)

Amazon's commission rates are between 6 and 15 percent, depending on
the item being sold:

                               Computers | 6 percent
  Camera & Photo, Cell Phones & Service, 
                   and Electronics items | 8 percent
      Items in the Everything Else Store | 10 percent
                     Musical Instruments | 12 percent
                 All other product lines | 15 percent   <---

There's also an additional closing fee that they realize on each
transaction, tied to the shipping rate, which ranges from a fixed $.65
to $0.65 + $0.10/lb.

Somewhere in the range of 15 percent would be a good starting point
for your business.  You could also charge a monthly or yearly fee in
addition to this, such as Amazon's Pro Merchant Subscription
($39.99/mo.), which could offer subscribing merchants additional
perks, such as a waivering of the $.99 fixed closing fee, and
streamlined inventory/listing control.

If you have any other questions, please don't hesitate to ask before
rating this answer.

Thank you,

jbf777



Sources/Search strategy:
Amazon: 877-251-0696
Help > Selling at Amazon.com > Listing Your Item > Fees and Pricing 
http://www.amazon.com/exec/obidos/tg/browse/-/1161240/ref=br_bx_c_2_1/103-6583734-0313422

Amazon.com's Bezos Turns to Starbucks, Bombay to Boost Profit
http://www.bloomberg.com/apps/news?pid=10000103&sid=arx2gUntixtg&refer=us

---

Request for Answer Clarification by scott702-ga on 03 Feb 2006 19:47 PST

JBF,

Thank you for your prompt response. 

I just want to be clear on one point that involves the numbers referenced.

Let's say an Amazon.com associate is on a 5% referal rate fee, and
that assoicate's link sells a computer which generates a commission of
6% (based on your numbers) for Amazon.  Not including the closing fee
that you mentioned, Amazon would realize a 1% net commission (after
passing on 5% to the associate) off of this sale?

Thanks,

Scott

---

Clarification of Answer by jbf777-ga on 04 Feb 2006 09:02 PST

Hi Scott -

Those numbers are the exact numbers that Amazon realizes from the
transaction sold.  Seller ABC signs up to be a seller with Amazon.  He
sells a computer product for $100, Amazon takes 6% of that, or $6.00
(plus closing fees).  The seller keeps the remaining portion.

Let me know if you need any clarification.

jbf777