@Heather "Rest assured" ... Really? Probably the understatement of the year.
It seems that no matter what we do or don't do, things are getting much worse. Especially for those who are not marketing experts. I hope I am wrong, but I have no indication so far that there is reason for optimism.
I might feel a bit better if Zazzle were to scrap the clause that says that designers can instantly and without notice being thrown off the platform altogether, for no reason at all.
I have over time seen many people talk about sitting at 14.9% royalty to avoid the Transaction Fee (TF) levied on Royalties of 15% or more. I have mentioned a time or two that that doesn't really pay off, there's only a narrow window where the TF causes you to earn less, after that you'll always earn more even with the TF deducted. With the current news that the TF - now to be called "Excessive Royalty Fee" (ERF) - will kick in at >10% I'm seeing all kinds of comments about needing to drop your royalty down to 10%. If you believe there are reasons to drop besides the fee, that's another conversation, I'm just here to talk about the math part. 😉
There are going to be a lot of screenshots here (which I've reduced for the forum but provide a link to the full-size image for easier seeing) because visuals are easier than typing out a bunch of detailed explanations, and because I really want to drive the point that the TF/ERF is rather insignificant.
OK, so first let's look at a mens' tie under the current/old system where one has used 14.9% to avoid the TF. These numbers reflect the actual list-price stated when plugging a percent into Zazzle's Royalty Calculator. On the left is result at 14.9%. On the right are results with various other higher percentages that trigger the fee.
At 14.9% so no TF, your Gross Royalty on a straight (Referrer = None) sale would be $5.16.
At 15%, the TF kicks in.
At 15.55%, your Net Royalty on a straight (Referrer = None) sale after the fee will be the same $5.16.
At 15.6% w/ TF, your Net Royalty starts surpassing what it was at 14.9% w/o TF.
That's only going up 7/10ths of a percentage point, only $0.30 more to customer, to negate the TF.
IF it's a referred sale, you need to go up to 15.7% to also make up for the referral 'carve-out'.
At 15.8%, your Net, whether a straight or referred sale, is going to be more than if you stayed at 14.9 to avoid the fee.
That's a difference of less than one percentage point and only $0.40 to customer.
So the TF is not going to hurt you unless you choose a rate in that narrow window between 15 - 15.7%.
Anything after that, you are always going to make more than if you stayed at 14.9 to avoid the small fee.
So now let's see what happens to your earnings on this tie with the ERF kicking in at 10.01%. In this case I am using worst case scenario of your tie being in the Wedding category so the max 50% carve-out. Also going to note here that the only unknown in this new plan is how exactly they're going to calculate one's Referral earning if it's a "self-promotion", formerly casually referred to a a PP2 link. So those lines in my screenshots are grayed-out as that is an unknown,
This shows staying at your 14.9% on the left, dropping to 10% just to avoid the fee on the right.
You'd be voluntarily reducing your earnings on a straight sale by $1.62, and by $0.96 on a sale where you're credited as the 15% referrer. Lowering your rate to prevent Zazzle from making an extra $0.26 is costing you money.
Now let's look at what you are/were currently earning at 14.9%, and how much we have to increase the royalty percent to make that same amount under the new system. This screenshot shows 14.9% the old way and the new way.
If you make no changes, you'll earn $0.26 less on a straight sale. The real bite comes from the 50% carve-out if the sale was referred. In that case, you'll earn $1.80 less than you did before. ($2.32 vs $4.12). If you are credited as the regular 15% referrer, you'll make the same $5.19 as before for the referral commission, and your total earnings (royalty + referral) will be $1.80 less.
So what would you need to increase the royalty to to earn at least as much as you were before? For a straight sale, the answer is 15.6%. Again, only 7/10ths of a percentage point and just $0.30 more to the customer.
Again, the "carve-out" IF it's a referred sale is the big bite. So how much higher do we have to go to make up for that?
23.7%.
Going from 14.9 to 23.7 seems extreme. But the cost to the customer (at full list price as I've been using) is only $4 more. A measly $4. And the difference to you on a straight sale is +$3.53.
One final comparison - upping to 23.7% to earn the same as before, or dropping to 10% to avoid the ERF:
That is a significant difference in earnings.
Dropping to 10% is only going to hurt you.
There are a LOT of numbers in this post (sorry, @Cat 😉) but it was making my head hurt, all the comments about dropping to 10% or losing money because of the fee. So I really wanted to hammer home the point (with real numbers) that if avoiding the TF/ERF is your only reasoning for going low, you're only hurting yourself. The TF/ERF fee is insignificant as long as you avoid that very narrow window. Outside of that narrow window, you are not losing money from the fee, you are actually earning more.
There are lots of opinions being offered about going high or going low but in this original thread-starter post, I just wanted to, again, drive home the point that mathematically, the Transaction Fee / Excessive Royalty Fee is not consequential enough to be the deciding factor in what royalty rate you choose.
And now the disclaimers:
I am not privy to any more info than anyone else, just going on what Z has released to us at this point.
My interpretation is (in no particular order)
1) the max royalty we can set has changed from 99% to 50%
2) the Transaction Fee (now called Excessive Royalty Fee) will trigger at 10.01% instead of 15%
3) the referral carve-out (Now called "Marketing Royalty Fee") applied to all Self or 3rdParty referred sales will now be 35-50% instead of 20%.
4) Regular referrals w/ RF ID (now called "Cross-Promotion Links") will continue to pay a flat 15% to the referrer.
5) The only unknown is what your referral commission will be on a PP2 link (now called "Self-Promotion Link").
I could be wrong about any of that, but those are the interpretations I based all my above calculations on.
And since #5 is still unclear until either Zazzle makes it clear or we figure it out ourselves once sales reports start coming in after the 1st, I couldn't factor that into any of my comparisons.
* I choose a tie for my comparisons because it's neither a particularly cheap or particularly high-end item, and there are no size or style or User Options to complicate it. Numbers & percents will of course vary depending on product but the point remains clear (I hope) - the TF/ERF by itself is not a sound reason to lower your royalty to a meager 10%.
Thank you for coming to my Ted Talk. That's all I got right now.
