How to Price Your Products Correctly in E-Commerce — Complete Guide

The Mistake That Costs You All Your Profits

"Product costs me SAR 50, I sell it for SAR 80. That's SAR 30 profit."

Wrong.

Because you forgot:

• Platform commission (Salla, Zid, Shopify)
• Payment gateway fees (Moyasar, Tap, Tabby)
• 15% VAT
• Shipping cost
• Packaging cost
• Returns (5-15% of orders)

After all these fees, your actual profit might be SAR 10 instead of 30.

The Fees You Must Account For

1. Platform Commission

Every platform takes a cut from each sale:

• Salla: Free plan 0% commission, paid plans charge monthly subscription with no commission
• Zid: Depends on plan — from 0% to 2%
• Shopify: 0.5% - 2% depending on plan + fixed fees
• WooCommerce: Free (but you pay for hosting + plugins)

2. Payment Gateway Fees

Every electronic payment has fees:

• Moyasar: 1.85% + SAR 1 per transaction
• Tap: 2.65% + SAR 1
• HyperPay: 2.5% - 3.5%
• Tabby (BNPL): 4% - 6% — higher because they assume installment risk
• PayPal: 3.49% + SAR 2.49

3. Value Added Tax (VAT)

In Saudi Arabia and UAE: 15% and 5% respectively.

Important: VAT is added on top of the final selling price. If your price is SAR 100, the customer pays SAR 115. The SAR 15 goes to the tax authority — not to you.

4. Shipping Cost

If you offer free shipping — you're paying:

• Same-city delivery: SAR 15-25
• Inter-city shipping: SAR 25-40
• Express shipping: SAR 35-60

5. Packaging

Box + filler + stickers + thank you card = SAR 3-8 per order.

The Correct Pricing Formula

Instead of calculating manually, here's the formula:

Selling Price = (Product Cost + Shipping + Packaging + Fixed Fees) / (1 - Platform Rate - Payment Rate - Target Margin)

Practical Example:

• Product cost: SAR 50
• Shipping: SAR 20 (if offering free shipping)
• Packaging: SAR 5
• Fixed payment fee: SAR 1
• Platform rate: 0%
• Payment rate: 2.65%
• Target profit margin: 30%

Selling Price = (50 + 20 + 5 + 1) / (1 - 0 - 0.0265 - 0.30) = 76 / 0.6735 = SAR 112.86

Suggested selling price: SAR 113 (before tax) Customer price after VAT: SAR 129.95

Smart Pricing Strategies

Psychological Pricing

• 99 instead of 100: Customers perceive it as "nineties" not "a hundred"
• In Saudi Arabia: SAR 95 or SAR 99 are most common
• For premium products: Round numbers work better (SAR 500 not 499)

Bundle Pricing

Instead of selling one product for SAR 100, sell 3 for SAR 250. The customer feels they're saving, and you increase average order value.

Free Shipping Threshold

"Free shipping on orders above SAR 200" — motivates customers to add more items to reach the threshold.

Don't Calculate by Hand — Use the Calculator

We built a Product Pricing Calculator specifically for store owners in Saudi Arabia and the Gulf.

Enter product cost, shipping, platform, payment gateway, and target margin — get the suggested selling price, tax amount, and actual net profit.

Try the calculator free — no signup required.

After Pricing — Let Customers Know

After pricing correctly, the most common question will be: "How much with shipping?" and "Is there tax?"

Instead of answering manually, RaddBot answers pricing and shipping questions automatically — 24 hours in Arabic.

Join the waitlist.