In this post, we’ll talk about payment processing fees: what they are, who charges them, and why they might change in the future. These fees are not set by Artisans Cooperative, and are in addition to the Artisans Cooperative sales commission. We’ll also provide a simple calculator that helps artisans price their goods to cover the cost of fees.
In late 2022-2023, Artisans Cooperative ran a poll called Marketplace Priorities. In the poll results, we received a very important message from our community: it was very important that the marketplace fees be simple, transparent, and easily calculable. It was even more important that the fees be simple, rather than low. Artisans were willing to pay higher fees, but they had to know what the fees were, in advance.
This makes complete sense. One of the challenges artisans experience on Big Tech platforms is “death by 1,000 fees”: there are listing fees, re-listing fees, subscription fees, sales commissions, payment processing fees, currency conversion fees, mandatory advertising fees, payment reserves, and more. Yet even amongst those many fees, the biggest challenge artisans have is their unpredictability: some fees are charged on some orders and not others. It’s impossible to price goods appropriately to cover unknown and unknowable fees.
In some sense, Artisans Cooperative is in the same situation as the artisans themselves when it comes to the banks and payment processors of the world. These big companies change their fees often, seemingly in lock-step with each other, and we have no control over these fees. Some providers like Paypal knowingly charge much higher fees, but the fact that shoppers love their ease and convenience means that we have to play by their rules to make sales.
That’s why, when we first set up our fees and commissions, we separated the Artisans Cooperative sales commission – which will not change unless the membership votes to do so – from the payment processing fees that banks charge us.
As we began having sales and learning the real costs of running the marketplace, we quickly ran into a major problem: as a marketplace starting out and using existing tech tools, we were going to have to pay payment processing fees twice on each order. Artisans Cooperative pays payment processing fees to receive funds from the customer, and we pay processing fees again when we transfer payouts to each individual artisan.
Even worse, we’ll pay them three times on refunds and returns. (When there is a refund, the originally-charged fees are never refunded, and we are also charged for the transfer of money from the artisan back to us.) A couple years ago, all the banks and processors changed their policies such that when a payment was refunded, the payment processing fees were not refunded along with them.
When a customer cancels an order, the shop has a negative income for the payment processing spent on that order. This is yet another cost of doing business that businesses everywhere are swallowing at a time when returns and refunds are highly expected by customers.
The most detrimental aspect is the fact that a flat fee is charged by payment processors, in addition to a percentage fee. On big-ticket items, a $0.49 flat fee is negligible. On small orders, however, it can be quite significant! For a $1 purchase, the flat fee plus the percentage fee mean that more than half the list price is swallowed up by the payment processor.
We must emphasize that these payment processing fees are not commissions or profits for the Coop: these are irretrievable bank payments. Our commissions are advertised as “plus payment processing fees” because banks change their fees, and there’s nothing we can do about it but pass them through as a cost of doing business.
At the time of this writing, we are trying to ease the sting by splitting payment processing fees with artisans:
- Artisans Cooperative is paying the banks 5.49% + $0.49 in payment processing fees on the entire order value. This includes not just the product value, but also the money paid for any customer fundraiser donations (“tips”), shipping, and taxes.
- Artisans are only charged part of that cost: 3.49% + $0.49 of product value, without including donations, shipping, or taxes.
Marketplace Fees Pricing Calculator Tool
To help artisans set prices so they can take what they need from product sales on our marketplace, we have created a simple little calculator using Google Sheets. To use this calculator:
- Open the preferred calculator button below: with or without currency conversions.
- In the top left, click File > Make a copy, or File > Download. Now you can edit it however you like while keeping the original free for others to use.
- The calculator has two options:
- Use the “Artisan Will Get (After Fees)” table to start with the price you want to set, and it will tell you how much you’d receive after fees.
- Use the “Artisan Should Charge (To Cover Fees)” table to start with the amount you’d like to receive, and it will tell you the price you should charge to get that amount after fees.
Because of the triple fees incurred during refunds, we encourage you to please not voluntarily refund shipping overages, unless a customer specifically asks for it.
Fees like this are never fun news to share. But we all want the Coop to thrive and earn many sales for years to come, and that starts with earning real revenue for all!
About Artisans Cooperative
We are growing an online handmade marketplace for an inclusive network of creatives: a co-op alternative to Etsy.
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