How vendor royalties are calculated


	How vendor royalties are calculated
	Last Edited - 04/1/2013 4:03pm PDT
	Category Path - Shopping Cart Software Components

quote

The royalty value my vendors earn on their products is set to 45%. However, quite often, the royalty values in my exported spreadsheets are not reflective of 45%. How exactly are the royalty values calculated?

After an order is placed in your store, where the product(s) include vendor royalty rules, the system goes through the following process to calculate the royalties earned.

The Formula

The system does a check for the following in order to calculate the royalties earned:

1. Checks for Order Grand Total discounts (not direct product price discounts) and/or Reward Points
(OGT Discount + Reward Points) = Discount

2. Checks for Taxes and/or Shipping
(Discount - (Taxes + Shipping + Zone Fees + Additional Shipping Markup)) = Adjusted Discount

3. Then, it takes the Adjusted Discount divided by the Product Subtotal
(Adjusted Discount / Product Subtotal) = X

4. After that, it takes X, and subtracts the value from 1
(1 - X) = Royalty Adjustment Multiplier

5. Finally, it takes the Adjusted Product Price (price after discounts that directly adjust the product price), multiplied by the Product Royalty Value, multiplied by the Royalty Adjustment Multiplier, to give the final Vendor Royalty for a product.
(Adj. Product Price x Product Royalty Value x Royalty Adjustment Multiplier) = Vendor Royalty

The Formula - in action!

Using all of the different factors that could come into play, here is an example order:

example order

Product Subtotal: $320.00
Product A: $320.00
Grand Total: $202.50

Zone Fee: $50.00
Shipping Fee: $30.00
Additional Shipping: $5.00
Tax: $20.00

Coupon for 50% off Grand Total: $212.50
Reward Points: $10.00

Product Royalty Value: 45% purchase price

The stated vendor royalty earned is $91.12.

Let's double-check it!

1. Are discounts to Order Grand Total present? Are there any Reward Points? If yes, (OGT Discount + RP) = Discount
Yes, ($212.50 + the $10.00 Reward Points) = $222.50

2. Are there Taxes and/or Shipping? If yes, (Discount - (Taxes + Shipping + Zone Fees + Additional Shipping Markup)) = Adj. Discount
Yes, ($222.50 - ($20.00 + $30.00 + $50.00 + $5.00))= $117.50

3. (Adj. Discount / Product Subtotal) = X
($117.50 / $320.00) = 0.3671875 = X

4. (1 - X = Royalty Adjustment Multiplier)
(1 - 0.3671875) = 0.6328125

5. (Adj. Product Price x Product Royalty Value x Royalty Adjustment Multiplier) = Vendor Royalty
($320.00 x 0.45 x 0.6328125) = $91.125, rounded to $91.12

The Vendor Royalty earned on Product A in this scenario, is $91.12