Examples of Variable Cost and Fixed cost

First, let’s take a look at what is a Variable Cost and what is a Fixed cost. Based on Wikipedia:

• Variable Cost: Are expenses that change in proportion to the activity of a business. Or in simpler terms, the cost that goes up when your sales goes up.
• Fixed Cost: Are business expenses that are not dependent on the level of goods or services produced by the business. Or in simpler terms, those monthly fees you have to pay for your online shop.

These two are the only cost you need to worry about for your entire online shop. All costs will just fall into these 2 categories. To make it perfectly clear, here are some of the examples.

Variable Costs:

• Product costs
• Delivery costs
• Packaging costs
• Any raw material costs
• Transaction fees

Fixed Costs:

• Staff salary
• Yearly e-commerce subscription fees
• Yearly payment gateway fees (if any)
• Rental costs
• Accountancy costs

While it feels different, many of these costs and fees are the same for a normal shop and an online shop. So what we know of the ‘offline’ shop can be applied to the online shop too.

So if you are given the choice, which cost would you prefer? Variable or Fixed?