Before Dokan 4.0, when admins created marketplace-wide discounts, vendor earnings would decrease even though vendors didn’t authorize these promotions. This created tension between marketplace growth strategies and vendor profitability. The new system solves this through three distinct calculation methods.
Option 1: Admin Bears Full Discount
This option protects vendor earnings during admin-initiated promotions. When marketplace admins want to run sales without affecting vendor relationships, they can absorb the entire discount cost.
Step-by-Step Calculation Breakdown
Example: $200 Order, 30% Commission, $50 Discount
Step 1: Calculate Base Earnings (Before Any Discount)
- Product Price: $200
- Admin Commission Rate: 30%
- Base Admin Earnings = $200 × 30% = $60
- Base Vendor Earnings = $200 – $60 = $140
Step 2: Apply Discount to Admin Only
- Customer Pays: $200 – $50 = $150
- Admin Bears: Full $50 discount
- Admin Final = $60 – $50 = $10
- Vendor Final = $140 (unchanged)
Step 3: Verification
- Admin ($10) + Vendor ($140) = $150 ✓
- Customer paid $150 ✓
- Vendor protected at $140 ✓
Calculation When Subsidy Kicks In
Example: $200 Order, 20% Commission, $50 Discount
The Problem:
- Base Admin Commission: $200 × 20% = $40
- Discount Amount: $50
- Shortfall: $50 – $40 = $10 (Admin can’t cover full discount)
Solution:
- Admin Contribution: $40 (all available commission)
- Subsidy Created: $10 (tracked separately)
- Vendor Still Receives: $140 + $10 = $150
Here is how this works-
• Vendor gets paid immediately ($150)
• Admin account shows -$10 subsidy
• Subsidy settled during next payout cycle • Vendor earnings remain predictable
Option 2: Vendor Bears Full Discount
When vendors create their own promotions or agree to sales, they should control the discount impact.
This option mirrors traditional retail, where the seller absorbs promotional costs.
Step-by-Step Calculation Breakdown
Example: $200 Order, 30% Commission, $50 Discount
Step 1: Apply Discount First
- Original Price: $200
- Vendor Discount: $50
- New Order Total: $150 (This is what the customer pays)
Step 2: Calculate Commission on Discounted Amount
Admin Commission = $150 × 30% = $45
(Admin earns a percentage of the actual sale price)
Step 3: Vendor Receives Remainder
Vendor Earnings = $150 – $45 = $105
Why Commission Changes:
• Admin commission tied to actual transaction value
• Reflects real revenue flowing through marketplace
• Maintains percentage-based partnership model
Final Distribution:
- Customer Pays: $150
- Admin Gets: $45 (30% of actual sale)
- Vendor Gets: $105 (bears full $50 discount impact)
Option 3: Shared Discount (Admin and Vendor)
Collaborative promotions require cost-sharing. When both admin and vendor benefit from increased sales volume, splitting discount costs creates aligned incentives.
Step-by-Step Calculation Breakdown
Example: $200 Order, 30% Commission, $50 Discount (30% Admin/70% Vendor Split)
Step 1: Divide the Discount Burden
- Total Discount: $50
- Admin’s Share: $50 × 30% = $15
- Vendor’s Share: $50 × 70% = $35
Step 2: Adjust Base Calculation
- Start with Original Price: $200
- Subtract Vendor’s Discount Share: $200 – $35 = $165
This creates new base for commission calculation.
Step 3: Calculate Adjusted Commission
Admin Commission on Adjusted Base: $165 × 30% = $49.50
Step 4: Apply Admin’s Discount Share
- Admin Before Discount: $49.50
- Admin’s Discount Share: $15
- Admin Final: $49.50 – $15 = $34.50
Step 5: Calculate Vendor Final Amount
- Customer Pays: $150
- Admin Gets: $34.50
- Vendor Gets: $150 – $34.50 = $115.50
Verification:
- Admin Discount Impact: $60 – $34.50 = $25.50 reduction
- Vendor Discount Impact: $140 – $115.50 = $24.50 reduction
- Total Impact: $25.50 + $24.50 = $50 ✓
Why This Formula:
• Vendor’s discount applied before commission calculation
• Prevents “double-dipping” where admin benefits from vendor’s discount
• Creates proportional impact based on agreed split
Refund Calculations Across All Scenarios
Full Refund Process
Admin Bears Discount Example:
- Original: Admin $10, Vendor $150, Subsidy $10
- Refund: Customer gets $150 back
Actions:
– Vendor returns: $150
– Admin returns: $0 (already gave via subsidy)
– Subsidy cleared: $10 (debt cancelled)
Partial Refund (50%)
Shared Discount Example:
Original: Admin $34.50, Vendor $115.50
50% Refund = $75 to customer
Proportional Return:
– Admin returns: $34.50 × 50% = $17.25
– Vendor returns: $115.50 × 50% = $57.75
– Total: $17.25 + $57.75 = $75 ✓
Legacy Method (Pre-4.0) – For Reference
How It Worked
- Order Total: $200
- Apply Discount First: $200 – $50 = $150
- Calculate Commission: $150 × 30% = $45
- Vendor Gets: $150 – $45 = $105
Why We Moved Away
• Vendor earnings dropped from $140 to $105 (-$35)
• No vendor consent for admin promotions
• Created vendor dissatisfaction • Limited marketplace promotional flexibility
Decision Framework
Use “Admin Bears Discount” When:
✓ Running Black Friday/Holiday sales
✓ Testing price sensitivity
✓ Competing with other marketplaces
✓ Building vendor loyalty
Use “Vendor Bears Discount” When:
✓ Vendor requests promotion
✓ Clearing vendor inventory
✓ Vendor-specific sales events
✓ Traditional retail model preferred
Use “Shared Discount” When:
✓ Joint marketing campaigns
✓ Both parties benefit from volume
✓ Long-term promotional agreements
✓ Fairness is priority