An Ultimate Guide on TikTok Shop Fees

July 24, 2024

Datech

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TikTok Shop is rapidly becoming a favorite e-commerce platform for businesses eager to tap into the social media-driven marketplace. With millions of active users daily, TikTok provides an unparalleled opportunity to reach a vast audience and drive sales. However, understanding TikTok Shop fees is crucial for ensuring profitability and making informed business decisions.

In this article, we’ll delve into the different types of TikTok Shop fees, how they impact your business, and strategies to manage and minimize these costs effectively.

Table of Contents

Understanding TikTok Shop Fees

Like most e-commerce platforms, TikTok Shop has its own seller fee structure. TikTok Shop fees are multifaceted and vary based on product categories and regions. Here’s a detailed breakdown Here’s a detailed breakdown

1. Referral Fee (US only)

Referral Fees are a comprehensive fee structure introduced by TikTok Shop in the U.S. marketplace that combines marketplace commissions with any transaction fees, but excludes shipping and taxes. Referral fee rates will vary depending on the product category, but will mostly be 6% from 1 April 2024 onwards.

TikTok Shop 2024 commission policy update:

Newly on-boarded sellers who achieve “Active” status in the Merchant Center between 1 April 2024 and 31 October 2024 (GMT-8) are eligible to receive a 60-day referral discount of 2% + $0.3 per order, but only the first $500,000 in sales will be discounted. receive the discount.
Starting 1 April 2024, the TikTok Store will increase the referral fee to 6% per order on all eligible transactions. From 1 July 2024, it will increase to 8%.

👉 Click here to follow the latest official commission policy

How to Calculate Referral Fees?

1. For New Sellers with Referral Fee Discount: Referral Fee = 2.0% *(Customer payment + Platform discount) + $0.30 per order

2. For regular sellers: Referral Fee = (Customer payment + Platform discount – Tax) * Referral rate

Customer Payment is the actual amount paid by the customer for the product.
Platform discount is any discount offered by TikTok that reduces the price of the product.
Tax is the sales tax applicable to the transaction.
Referral Rate is the percentage charged based on the product category.

Example:

You are a business owner selling a women’s skirt on TikTok Shop for $106. Assuming TikTok Shop offers a $10 discount on the product, the applicable sales tax is $2. By looking in the TikTok Shop Referral Fees in 2024 by Category table, you find that the women’s skirt is part of Womenswear & Underwear+ Women’s Dresses, which has a referral fee rate of 6%.

The referral fee for this item is calculated as follows:

Referral Fee = ($106 + $10 – $2) × 6% = $114 × 6% = $6.84

Therefore, the referral fee you need to pay to TikTok Shop for this sale is $6.84.

2. Marketing commission costs (UK and South East Asia)

UK: Platform Commission Fee

The Platform Commission Fee is a specific percentage of the total order amount that TikTok Shop charges Sellers as a fee for their use of the Platform. The commission rate in the UK is 5%, inclusive of applicable taxes, including but not limited to Value Added Tax (VAT).

How to Calculate Platform Commission Fee?

Commission Fee = (Net sales + Platform discount – Customer refund) * Rate

Net Sales = Original price + Customer paid shipping fee – Seller discount- Platform discount

Net Sales is the price shown on the product page plus the shipping fee paid by the buyer minus the platform discount.
Platform Discount is any discount offered by TikTok that reduces the price of a product.
Customer Refund is fee returned to buyers.
Rate is a commission rate of 5%.

Example:

You are a business owner selling a ladies skirt on TikTok Shop for £500. Assuming TikTok Shop offers a £20 discount on this product, you offer a £30 discount on this product and the user pays £50 for postage. The commission rate in the UK is 5%.

The commission fee for this product is calculated as follows:

Net sales = £500 + £50 – £30 – £20 = £500

Commission Fee = (£500 + £20 – £0) × 5% = £520 × 5% = £26

Therefore, the commission fee you need to pay to TikTok Shop for this sale is £26.

South East Asia: Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam

Marketplace commission fees are charged at different rates depending on the category and whether SST is inclusive or not, with rates ranging from 0%-20%. The Marketplace Commission Fee is automatically deducted from the final order/settlement amount at the end of the order, but excludes shipping charges and TikTok Shop platform discounts.

Howto Calculate Marketplace Commission Fee?

Marketplace Commission Fee = (Item price – Seller discount) * Rate

Item Price is the price of the item displayed on the Merchant Details page.
Seller Discount is any discount offered by the seller that reduces the price of the product.
Rate is a different percentage based on different product categories and whether SST is inclusive or not.

Example:

You are a business owner selling a ladies skirt on TikTok Shop for MYR500. Let’s say you are offering a discount of MYR30 for this product and you are SST inclusive. Look up the Marketplace Commission Fee Rate By Product Sub-Category to find the rate for the ladies skirt at 4.32%.

The commission fee for this product is calculated as follows:

Marketplace Commission Fee = (MY500 – MY30) × 4.32% = MY20.30

Therefore, the commission fee you need to pay to TikTok Shop for this sale is MY20.30.

3. Transaction fees (South East Asia)

Upon successful delivery of an order to a buyer, TikTok Shop will automatically deduct the transaction fee from the final order/payment settlement. All sellers from South East Asia pay this fee when processing a successful order in TikTok Shop. The transaction fee rate varies from market to market, e.g. 2.16% (including SST) for Malaysia and 3.21% for Thailand.

How to Calculate Transaction Fee?

Transaction Fee = (Customer payment – Customer order refund) * 2.16 %

* Take a seller in Malaysia for example.

Customer Payment is the actual amount paid by the customer, this includes subtracting the discount offered by the seller and adding the shipping fee paid by the customer.
Customer Order Refund is the fee returned to the buyer.
Rate for transaction fees in Malaysia is 2.16%.

Example:

You are a business owner selling a ladies’ skirt on TikTok Shop for MYR500. Let’s say you offer a discount of MYR30 for this product and the customer pays MYR30 for the shipping of this product.

The commission fee for this item is calculated as follows:

Transaction Fee = (MY500 – MY30 + MY30) × 2.16% = MY10.8

Therefore, the commission fee you need to pay to TikTok Shop for this sale is MY10.8.

4. Shipping

Shipping cost is another important part of TikTok Shop fees. Shipping fee can be divided into what you pay to your logistics partner, what the TikTok shop platform pays for shipping, and what the buyer pays for shipping, depending on the scenario.

If you offer your buyers a free shipping offer and choose to fulfill by yourself, the shipping is the cost paid to the logistics partner. If you choose to fulfill by TikTok Shop, the shipping is the TikTok shop platform shipping fee, which is automatically deducted from the final order/payment settlement.

Shipping costs vary depending on the weight of the parcel, the shipping method, and the shipping distance. Usually, the heavier the parcel is and the longer the shipping distance, the more expensive the shipping cost. In addition, airfreight is faster and more costly than ocean freight. Therefore, your net profit will need to be reduced by the actual shipping costs in addition to the costs mentioned above.

However, if you do not offer free shipping to your buyer, the buyer will have to pay for the shipping cost, which is not deducted from the final order/payment settlement.

5. Taxes

E-commerce platforms must comply with tax laws, which vary greatly from country to country, state to state, and even city to city, and TikTok Shops are no exception. TikTok Shops usually have a system in place that automatically calculates the appropriate sales tax based on the buyer’s shipping address and the type of product being sold.

The sales tax is usually incorporated into the original price of the item and displayed to the consumer, and then collected by the platform after the buyer pays for the item. The platform is responsible for remitting the collected tax to the appropriate tax authorities, which simplifies the process of handling the tax for TikTok Shop sellers.

Example:

You are a business owner selling a women’s skirt with a $500 price tag to a customer in New York City on TikTok Shop.

Depending on local tax laws, sales tax may include:

New York State Sales Tax Rate: 4%;
New York City sales tax rate: 4.5%;
Additional local taxes (e.g., Metropolitan Commuter Transportation District surcharge): 0.375%.

Sales tax collected on $500 of merchandise is: $500 × (4% + 4.5% + 0.375%) = $44.38

Therefore, the total amount charged to the customer (the amount of the product displayed on the product details page) is: 544.38 USD = 500 USD + 44.38 USD

6. Other Fees

In addition to the common fees listed above, you may also incur additional fees if you participate in other marketing campaigns launched by the platform, such as affiliate commissions, SFP (Shipping fee program) service fee, etc.

If you are a US merchant, the actual amount you get for selling an item = price paid by the buyer – referral fee – taxes – shipping fee – (other fees if any)
If you are a UK merchant, the actual amount you get when you sell an item = price paid by buyer – marketplace commission fee – taxes – shipping fee – (other fees if any)
If you are a South East Asia merchant, the amount you actually get for selling an item = price paid by buyer – marketplace commission – transaction fee – shipping fee – (Other fees if any)

How to Minimize TikTok Shop Fees?

Managing TikTok Shop fees effectively can significantly impact your overall profit margins. Here are some strategies to help you reduce these costs:

1. Reduced Production and Procurement Costs of Products

One effective way to offset TikTok Shop fees is by lowering your production and procurement costs. This can be achieved by negotiating better rates with suppliers, sourcing materials more cost-effectively, or optimizing your production processes. By reducing these costs, you can absorb some of the TikTok Shop fees without compromising your profit margins.

2. Reduce Inventory Costs with Dropshipping

Another strategy is to adopt dropshipping, which allows you to send products directly from the supplier to the customer, bypassing the need for maintaining large inventories. This can drastically reduce inventory holding costs and minimize the risk of unsold stock. It also streamlines your logistics, making it easier to manage shipping fees.

👉 Click to know more about What is Dropshipping? and How to Dropship on TikTok Shop?

3. Use Datech ShopSync to Optimize Pricing Rules

Datech ShopSync offers a powerful tool for managing your TikTok Shop fees by allowing you to set different pricing rules for various categories, products, and sales markets. This flexibility enables you to adjust your prices to account for the varying fee structures across regions and product types, maximizing your profits. For example, you can set higher prices for categories with higher commission fees or adjust prices based on the shipping costs to different regions.

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Conclusion

Understanding and managing TikTok Shop fees is essential for running a successful e-commerce business on the platform. By familiarizing yourself with the different types of fees, their impact on your profitability, and strategies to minimize them, you can make informed decisions that enhance your bottom line. Leveraging tools like Datech ShopSync can further streamline your operations, allowing you to set customized pricing rules and integrate your Shopify store seamlessly with TikTok Shop.

Ultimately, being proactive about managing TikTok Shop fees and utilizing the right tools will position your business for success in the competitive e-commerce landscape. So, take the next step and consider Datech ShopSync for your e-commerce success, ensuring you stay ahead of the curve and maximize your profitability on TikTok Shop.