A marketplace agency that guarantees sales: who guarantees your profit?
A marketplace agency that guarantees sales promises a figure, not a profit. Here is why a sales target is easy to hit, how to read the margin in a monthly report, the two questions to ask before you sign, and what we do instead.
A sales guarantee from a marketplace agency is a promise about what your store sells, not about what it keeps. A sales target can be hit with discounts, vouchers and more ad spend, and the cost of each one lands on your margin. So before you sign, ask how you will see profit after fees, ad cost and margin, and get the answer in writing.
What a sales guarantee covers, and what it leaves out
Picture a clause that promises sales up 2x in 3 months, guaranteed, with nothing about profit beside it. It fixes one figure: what the store sells. Hold your own agreement up against it. If no line speaks of profit, the agreement says nothing about what you keep.
- Clause 4
- Sales up 2x in 3 months, guaranteed
- Clause 5
- Profit: left blank
The sales figure is written down. What you keep is not.
Two words help here. Net profit is what is left from sales after marketplace fees, vouchers, ad spend and product cost. Margin is net profit as a share of sales: at 16.1%, every 100 you sell leaves you 16.10. A store can sell more and keep less.
A sales target can be hit with discounts. The cost lands on your margin.
Why a sales target is easy to hit
Three quick moves raise sales, and none of them needs a better store:
- A bigger shop voucher than last time. More buyers check out, and you pay for the voucher on every order that uses it.
- A deeper discount on more products. Orders rise, and each order keeps less.
- A bigger budget for pay per click ads, to buy more clicks. More visitors arrive, and you pay for every click, whether or not it ends in an order.
Each move raises sales and lowers the margin. A card that tracks only a sales target shows the target as hit, with the margin nowhere on it. So ask not whether an agency can reach a sales figure, but what reaching it cost you. The same pattern with a voucher is in our post on sales going up while profit goes down.
Read past the first line of the monthly report
Picture the first page of a monthly report: sales up 18.4%, orders up 10.8%. It looks like a win. Keep reading. The next lines decide the month: net profit after fees, ads and vouchers, the margin, and what changed and why.
| Report line | Change |
|---|---|
| Sales | +18.4% |
| Orders | +10.8% |
| Net profit after fees, ads and vouchers | +10.1% |
| Margin | −1.1 pts |
Margin: 16.1% last month, 15.0% this month.
Profit grew 10.1%, slower than sales at 18.4%, so each sale kept less: the margin fell from 16.1% to 15.0%, a fall of 1.1 points. A point is the gap between two percentages, so this is not a fall of 1.1%.
How to calculate the margin yourself
You can redo this sum with your own figures. Say the store sold 10,000 last month and kept 1,610 as net profit, a margin of 16.1%. The sum works the same in any currency.
- Sales grew 18.4%: 10,000 times 1.184 is 11,840.
- Net profit grew 10.1%: 1,610 times 1.101 is 1,772.61, about 1,773.
- Margin is net profit divided by sales: 1,773 divided by 11,840 is 15.0%.
- Compare: 16.1% last month, 15.0% this month. Sales went up, and the share you keep went down.
In your own store, the fees of each order are in My Income in Seller Centre. They differ by category and by the programmes you join. Sales less fees, vouchers, ad spend and product cost is net profit.
A report should end in a decision
On that first page, something cost more than it earned. Picture the next page naming it: two promotions in the same month. A sales target counts both the same. The margin does not: the voucher kept 3.9 of every 100 it sold, the campaign discount 11.2. So keep the campaign discount and cap the voucher. We go through the same page in what a monthly report should tell you in two minutes.
| Promotion | Orders | Margin | Decision |
|---|---|---|---|
| Shop voucher | 68 | 3.9% | Cap it |
| Campaign discount | 214 | 11.2% | Keep it |
Margin: net profit as a share of sales, on the orders each promotion brought.
Two questions to ask before you sign
Two questions show what you are buying. Ask them before you sign, in writing. They come from our nine questions to ask a marketplace agency.
- Will I see profit, or only sales? Listen for fees, ad cost and margin. An answer that stops at sales and orders means the report will not show what the store keeps.
- What do you promise, and what happens if you miss? Listen for what it will cost you: who pays for the vouchers, discounts and ads that reach the figure, and what the agreement says if it is missed.
What we do instead of a sales guarantee
We do not promise sales. We show what we did and what it cost, in a report with fees, ad cost and margin. Every figure is set against last month, and the costs sit on the same page as the sales, so you see net profit, not only sales.
Picture one month on a page in our format. Visitors fell 2.3%, yet orders rose 8.1%: a larger share of visitors bought, and conversion rose 0.3 points. Net profit after fees rose 15.7%, faster than sales at 12.1%, so each sale kept a little more. Had the margin fallen, it would stand in the same place.
| Report line | This month against last month |
|---|---|
| Sales | +12.1% |
| Orders | +8.1% |
| Visitors | −2.3% |
| Conversion | +0.3 pts |
| Cancelled orders | −26.0% |
| Fees and vouchers | +12.0% |
| Ad spend | +3.8% |
| Net profit after fees | +15.7% |
The figures are one month to picture. Conversion is the share of visitors who bought, so its change is in points.
A monthly report comes with every monthly plan. It is built from your own Seller Centre exports, with every figure against last month, and its first page answers four questions:
- How much did we sell?
- How much did we keep?
- Why did it change?
- What do we do next month?
We charge one fixed fee, with no percentage of your sales. To talk it through for your store, start with a free 30 minute consultation.
What to check this week
- Find the guarantee in your agreement, if you have one, and look beside it for a line about profit or margin.
- Open the report of last month and read down to net profit and the margin.
- Calculate the margin of the last two months yourself: net profit divided by sales.
- List the promotions of the month with the orders and margin of each: which to keep, which to cap.
- Before you sign with an agency, ask the two questions above, in writing. To see where your store stands first, take the store check, ten short questions.
Questions sellers ask
Can a marketplace agency guarantee sales?
An agency can write a sales figure into an agreement, and a sales target can be hit with bigger vouchers, deeper discounts and more ad spend. What the guarantee leaves out is the cost of reaching it, which lands on your margin. So ask, in writing, what the store will keep after fees, ad cost and vouchers.
Why does Lokaworks not guarantee sales?
Because a sales figure can be reached by spending your margin, a promise about sales says nothing about what you keep. Instead, we show what we did and what it cost, in a monthly report with fees, ad cost and margin, so the work is judged by net profit and not only by sales.
What is the difference between sales and profit on Shopee?
Sales are what buyers paid for your orders. Net profit is what is left after marketplace fees, vouchers, ad spend and product cost. Margin is net profit as a share of sales. The fees of each order are in My Income in Seller Centre and differ by category, so work out profit from that page.