The 1% Leak: How Hidden Marketplace Fees Cost Brands 1–3% of GMV — and How to Recover It

Orders spike every festival season and this year was no different. Orders were up 81% with electronics, luggage, and jewellery more than doubling in order volume. Our customer reconciliation audits show a hidden cost: marketplaces routinely shortchange brands by 1% to 3% of your total Gross Merchandise Value (GMV) due to fee errors and misclassifications.

If your brand did ₹100 Crores in GMV (gross merchandise value) in the festive season, a 2% leak means you lost ₹2 Crore—money that could have been pure profit. The good news? It’s recoverable.

Where the Revenue Leaks

Revenue leakage is caused by reconciliation that occurs:

• During fulfillment
• Due to fragmented fee structures and
• Due to reverse logistics slipups

Fulfillment faultline (Shipping and Packaging)

Fulfillment errors are the single biggest source of revenue leak. Marketplaces charge fulfillment fees based on the package dimensions and weight but errors are made.

Volumetric weight errors

• Your product might weigh 500g but the marketplace’s system might weigh it as 1kg due to a minor error in dimension capture or using an oversized box. The result: marketplace charges fees that are 2x or 3x of the amount that they should have charged.
• Other errors: Customer places an order with normal shipping but the marketplace fulfills it using express shipping and charges an extra amount that it should not have charged.

Fragmented fees

Marketplace fees are complex and dynamic making it practically impossible to keep track of them manually.

Commission mismatch

Referral and/or commission fees are tied to specific product categories. If the marketplace miscategorizes a product to one that is charged a higher fee, a higher commission is charged for each item that is sold.

Unfunded promotions

Marketplace routinely runs promotions that are funded partially. If a glitch occurs and the marketplace funds only 60% of the promised promotion amount, the brand has to absorb the remainder of the 40% discount given to the customer.

Hidden surcharges

Marketplaces introduce additional fees such as payment handling fees, closing fees and transaction fees without prior notification and since the settlement reports are paid net of commissions and fees, this cannot be reconciled for errors.

Reverse Logistics Errors (Returns and Inventory)

The reverse logistics process is error-prone and can cause revenue leakages for brands.

Missing inventory claims

When a customer cancels an order, any of these events can occur

• The product never makes it to the warehouse but a full refund is given.
• Product is damaged in transit to the warehouse but a full refund is given.
• Product is damaged in the warehouse and discarded without the inventory being adjusted.
• The customer never returns the item but the refund is given.
• A restocking fee is applied when it should not be.
• The product is returned to the warehouse but the inventory is not updated in the marketplace system.

Non-reversed closing fee

Marketplace charges a small fee, such as closing fees, for every successful sale but this should be reversed if there is a return. If the marketplace misses this, there is a revenue leakage on returns.

The Only Way to Plug the Leak: Automated Reconciliation

Manual methods to reconcile the errors are bound to fail. The only way to address these discrepancies is to use automated reconciliation software. An advanced reconciliation software such as Vin Reco is capable of doing the following:

System to system validation

Advanced reconciliation software can reconcile data from Order Management System (OMS), marketplace reconciliation reports and financial systems, highlighting the discrepancies and differences. Financial systems require reports monthly and quarterly. Marketplaces generate settlement reports on a different time schedule and this causes data sync issues.

Line item reconciliation

Every transaction is validated for correct charges and fees on a variety of parameters that include volumetric weight, commission rates, fee reversals and refund status.

Discrepancy reporting

Errors are flagged as a recoverable leak. If the commission charged is 10% instead of 5%, a report is generated that shows the amount charged, the amount that should have been charged and the refund amount that is due.

Claim automation

The discrepancy reports provide the evidence for a claim and a claim is auto generated in the timeframe that it must be filed.

The takeaway for every e-commerce brand is simple

You are losing money that you have earned and it must be addressed. Stopping the 1% Leak is the fastest path to increasing your net profitability without selling a single extra unit.