The verdict in three sentences
On a product with 20% gross margin, a 2% payment fee does not cost 2%: it eats 10% of your net profit. The reflex to "pass it at checkout" hurts conversion — the right strategy is to price the fee into the product from the start. Reserve the visible surcharge for the international card channel alone, where customers expect it.
The margin waterfall on a 10,000 FCFA item
Take an item sold at 10,000 FCFA with 25% gross margin (2,500 FCFA), home-delivered. Here is where the money goes.
| Line item | Amount | Impact on gross margin |
|---|---|---|
| Sale price | 10,000 FCFA | — |
| Product cost (75%) | 7,500 FCFA | Gross margin: 2,500 FCFA |
| Payment fee (2%) | 200 FCFA | -8% of profit |
| Net delivery | 1,000 FCFA | -40% of profit |
| COD failure provision (8%) | 200 FCFA | -8% of profit |
| Net margin remaining | 1,100 FCFA | 44% of gross margin |
The payment fee alone cuts 8% of profit; combined with delivery and cash-on-delivery (COD) failures, over half the margin vanishes. Every fee point counts when net margin is already thin.
Absorb or surcharge: the right trade-off
| Situation | Fee rate | Recommendation |
|---|---|---|
| Local wallet, basket > 10,000 FCFA | 1% to 1.5% | Absorb, price it in |
| Local wallet, small basket | 1.5% + flat | Set a minimum order |
| Diaspora international card | 3.8% to 4.5% | Visible 1-2% surcharge |
| Gross margin < 15% | any rate | Price it in, never absorb silently |
| Highly competitive market | 2% | Price in discreetly, keep round price |
Price-psychology rule for the African buyer: favor a round price with the fee baked in (e.g. 10,000 FCFA) over 9,800 + 200 FCFA displayed fees that drives them off at payment.
Mini case study
Moussa, a sneaker e-tailer in Dakar, sold pairs at 25,000 FCFA on a 22% gross margin (5,500 FCFA). He absorbed a 2.5% blended fee (625 FCFA) at checkout, i.e. 11% of his profit. By baking the fee into a round 25,000 FCFA price (instead of 24,500) and adding a 2% surcharge only on diaspora card payments, he recovered about 540 FCFA of margin per pair. On 300 pairs/month, that is 162,000 FCFA/month of profit regained.
FAQ
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Why does a 2% commission cost more than 2%?
Because it applies to the sale price but subtracts from the margin. On 20% gross margin, 2% of price = 10% of profit. The thinner your margin, the more brutal the relative impact.
Should I show fees to the customer?
Rarely on the local wallet: price them in. On international cards, a displayed 1-2% surcharge is accepted because the diaspora is used to FX fees.
How do I handle cash-on-delivery (COD) failure?
COD fails in 5 to 12% of cases (absent customer, refusal). Provision this risk in your price and favor mobile money prepayment when possible.
Below what margin must I price the fee in?
As soon as gross margin drops below 15%, silent absorption is dangerous: a single spike in card payments can make a sale loss-making. Always price it in.
Does a surcharge scare customers off?
On the local wallet, yes — buyers are sensitive to it. On international cards, no: the diaspora compares it to their usual bank fees and accepts it when it is clear.
Let's talk about your project. We build your fee-inclusive price grid to protect every margin point. WhatsApp +221 77 596 93 33.
Mohamed Bah
Fondateur, Kolonell
Passionate about digital and entrepreneurship in Africa, Mohamed has been helping Sénégalese businesses with their digital transformation since 2020. Founder of Kolonell, he believes every SME deserves a professional and accessible online présence.
