TikTok Shop Philippines adjusts fee algorithm: shipping fee included in base, refunds no longer deducted

Starting July 23, the fee calculation method for TikTok Shop Philippine cross-border stores will undergo an important adjustment.

The fee rate itself remains unchanged at 2.24% (including VAT), but the base for calculation has changed from the original 'net amount paid by the buyer and confirmed received' to 'discounted price of the product + shipping fee paid by the buyer'. At the same time, refund amounts will no longer be deducted from the fee base.

The combination of these two changes means that sellers need to recalculate their profit structure.

Image source: Google

Algorithm change: shipping fee is now included in the fee base, and refunds no longer refund the fee

First, look at the old rules. Previously, the fee was only charged on the portion of the amount actually paid by the buyer and confirmed received. If an order was refunded, the collected fee would also be refunded accordingly, and the fee base did not include the shipping fee paid by the buyer. In short, the platform only took a cut from the product transaction amount, and the shipping fee was not within the scope.

The new rules change the logic. The fee base becomes 'discounted price of the product + shipping fee paid by the buyer', meaning the shipping fee is also included in the fee scope. Moreover, refunds no longer offset the fee; even if the order is eventually canceled or returned, the platform still collects this fee.

Let's illustrate with an example. Suppose the discounted price of a product is 1,000 pesos, and the buyer pays 150 pesos for shipping, totaling 1,150 pesos. Under the old rules, the fee is calculated only on 1,000 pesos, charging 22.4 pesos. Under the new rules, it is calculated on 1,150 pesos, charging 25.76 pesos. If the order is later refunded, the old rules would refund the 22.4 pesos, but the new rules deduct the 25.76 pesos regardless. One order may only differ by a few pesos, but when the order volume is large, the difference becomes significant.

Image source: Google

Who is most affected: categories with high shipping costs and sellers with high return rates

This adjustment has varying impacts on different sellers. Categories with a high proportion of shipping costs are the first to be affected, such as furniture, home appliances, fitness equipment, and other bulky items. The shipping fee paid by buyers is often substantial. Previously, the shipping fee was not included in the fee base, but now it is fully included, so the increase in fees will be much more significant compared to small and light items.

Sellers with high return rates also face pressure. Previously, fees could be refunded when a refund occurred, but now the fee is charged regardless of whether the order is ultimately completed. This means every returned order will incur a 'sunk cost'. Clothing sellers who reduce return rates through wide sizing and multiple color options, or furniture sellers who reduce wrong purchases and returns through detailed dimension diagrams, will find the value of these refined operations amplified.

Sellers with low average order values and high volume also need to recalculate. Profits are already thin, earning only a dozen or two pesos per order. Now, with an additional few pesos deducted per order, plus the loss from non-refundable fees on returns, a significant portion of the profit could be eaten up.

Image source: Google

Platform's intention: refined monetization, increase per-customer value

From the platform's perspective, the logic behind this adjustment is not hard to understand. Including shipping fees in the fee base means the platform can earn more revenue from each completed transaction, especially for orders with high shipping costs, where monetization efficiency will noticeably improve. The design of not refunding fees on returns directly reduces the transaction costs borne by the platform.

TikTok Shop has been growing steadily in the Philippines, but e-commerce operations must ultimately return to a profitable model. When user scale and transaction volume are large enough, fine-tuning each fee rule becomes a natural choice to improve the platform's financial performance. This change may also signal that other regions will follow suit in the future.

Image source: Google

Conclusion

The fee rate has not changed, but the change in the calculation method is more subtle than a rate increase, and its impact is more far-reaching.

With shipping fees included in the base and no refund on fees for returns, these two changes taking effect simultaneously mean that for categories with high shipping costs and sellers with high return rates, the profit model needs to be recalibrated. Before July 23, getting the numbers right, reducing return rates, and adjusting pricing strategies — doing these three things solidly will ensure sellers are not caught off guard by the new rules.