ChannelEngine: how is automatic margin calculated?

About this article

This article describes ChannelEngine's automatic margin calculation feature, which you can utilize to customize price rules. You can read more about how to create price rules in this guide. 

Introduction

If your products have both a purchase and a regular price value attributed to them, but there is no value for the margin attribute, then ChannelEngine will automatically calculate it for you. 

This calculation is an estimation only, as it does not take into account any additional costs, if any, that are associated with each product. However, it does offer a way for you to create price rules based on the margin attribute. For example, you can create a rule which will exclude certain products from your product selection based on low-margin. 

How is this margin calculated?

It is important to realize that, in order to properly determine the margin, we take VAT based on the retail price of the product into account, as this is not normally added to your net income. The products themselves are, in most cases, procured from a third party – so tax is not subtracted from the purchase price.

The calculation is as follows: 

priceExVat = (Price / (100 + vatRate)) * 100; 
Margin = Math.Round(((priceExVat - PurchasePrice) / priceExVat) * 100, 2); 

Example 1 (taking VAT into account)

• Price = 200
• Purchase price = 50
• VAT = 20%

priceExVat = 200 / 120 * 100 = 166,67
Margin = (166,67 - 50 (= 116,67)) / 166,67 * 100 = 70% 

Example 2 (not taking VAT into account)

• Price = 200
• Purchase price = 50

Margin = (200 - 50 (= 150)) / 200 * 100 = 75%