Tophatter Payout Cycle Breakdown Explained

Whether you’re an established eCommerce seller or just starting out, you’ve likely heard of Tophatter, the discovery marketplace known for its 90-second live auctions. What you might not be familiar with is how selling on Tophatter actually works and what their payment cycle looks like. 

In this guide, we break it all down so you can learn how to sell, succeed and get paid as a Tophatter seller.

What is Tophatter?

Tophatter is a mobile discovery marketplace that hosts live auctions for products spanning every major category. Users scroll through Tophatter much like they scroll through social media, discovering products they want to bid on. Most auctions are fast, lasting only about 90 seconds. Picture it like a discount store like TJ Maxx, dollar stores, or Home Goods with the added competition of the auctions. Similar to eBay, Tophatter is a platform connecting buyers and sellers — they are not an e-retailer themselves. Buyers participate in auctions and can also purchase products at traditional fixed price or a “Buy Now” in Tophatter parlance.

They sell millions of items per month, have 30 million global shoppers, and thousands of sellers worldwide. They are live in 14 countries, but currently most of their users are based in the US, and see a lot of sales on mobile — 80% of their transactions are on mobile. 

How to Sell and Succeed on Tophatter

For sellers, Tophatter has become known as a go-to platform for turning inventory quickly. After all, their auctions rarely last longer than 2 minutes and buyers on Tophatter are generally looking to make a purchase (i.e. they’re not really “window shopping” or researching a product on Tophatter). 

The sellers that are most successful on Tophatter generally sell on other channels and use Tophatter to quickly drive sales volume or offload stale inventory. To get started, you have to fill out an application and agree to their seller terms. It’s a pretty quick onboarding process and you could make a sale as soon as today.

As part of their seller terms, Tophatter earns a flat rate commission of 9% across all categories plus a small fee to get your products a slot in the auction (see below for a full list of fees and how payouts work). 

Because their commission fee is the same across categories, sellers are able to efficiently test products in different categories and at different price points. And sellers are able to have total control over how much “shelf space” or visibility their products receive on the Tophatter homepage. You can set all of this through the Campaigns Tool.

In terms of what you can sell, their policies are pretty straightforward. In other words, you cannot sell illegal goods or items that don’t meet United States FTC regulations. Restricted items include (but are not limited to) alcohol, tobacco and smoking paraphernalia, firearms, live animals, flammable or combustible liquids, and more. See the full list here. 

On the other hand, their top selling categories include electronics, jewelry, health and beauty, home, apparel, branded goods and private labels, collectibles, pet supplies, and kids and toys. Unlike many other channels, Tophatter allows CBD products on the platform. 

How Tophatter Supports Sellers 

We caught up with Briana Dow, Head of Account Management at Tophatter, to learn about their selling program and the unique support they offer sellers (especially amidst all the uncertainty brought on by the COVID-19 pandemic). 

According to Dow, “At Tophatter, we pride ourselves on our close relationships with our sellers and our commitment to giving them what they need to be successful. Unlike many marketplaces, we don’t have one size fits all policies. We are flexible in creating solutions catered to each seller’s specific business need.”

She went on to say that they’ve increased their seller support efforts to meet the evolving needs of their sellers during the pandemic. This includes increasing 1:1 outreach with sellers, offering support through a variety of communications channels and weekly forums, making changes to payout policies (more on that below), and more. 

At the end of the day, Tophatter is committed to helping their sellers however they can, and this includes taking action based on things like market conditions and seller feedback and/or concerns.

How Tophatter Payouts Work

Now, let’s talk about all things fees and payouts.

As we mentioned previously, Tophatter charges a flat commission fee for all sales as well as a few other fees. Here’s how the fee structure breaks down:

• Commission Fee: A flat 9% commission fee is charged on the final sale price plus shipping price of each item.
• Scheduling Fees: Scheduling Fee Bid (often referred to as SFBs) are bids sellers place against each other for Auction Slots AKA shelf space.   Sellers pay a fee every time a product is run at an auction. The higher the SFB, the more auction schedules a seller will get, which means the more volume. These fees are low and range from under $1-$1.50.
• Processing Fee: There is a processing fee that is charged on the full sales price, including shipping price (shipping prices are set by the seller for each product). It comes out to 2.9% + $0.30 for each paid order.
• Incident Fees: These are applied when a customer has a negative experience due to seller fault. For example, if they didn’t receive their item or it was not as described. Incident fees are important to monitor because they’re used to calculate an Incident Fee Rate (IFR), which determines your payout cycle. They are also a very prescriptive way for sellers to improve their business. 

For a full breakdown of Tophatter fees click here.

Your actual payout cycle depends on a number of factors, many of which deal with the customer experience. Similar to Amazon’s unavailable balances, if a customer has negative feedback because of a defective or not-as-described item, for example, you’ll have to wait longer to get paid. This comes back to your Incident Fees and Incident Fee Rate, mentioned in the fee breakdown above.

According to Tophatter, “Incident Fees are accrued when actions within the seller’s control impact the customer experience negatively.” The more incident fees you are charged, the higher your Incident Fee Rate (IFR) is, and the longer your payout cycle. Depending on your IFR, you’ll get paid every 2 weeks, every 4 weeks, or every 8 weeks. The lower your IFR, the more frequently you’ll get paid. In each payout, you’ll see a breakdown of fees charged and your net balance.

Tophatter evaluates their sellers’ IFRs and payout cycles on a quarterly basis and makes adjustments based on performance. And, they make exceptions and relax the payout thresholds in some cases. 

For example, during Thanksgiving and Chinese New Year, orders can take longer to deliver due to factors outside a seller’s control. And, during the COVID-19 pandemic, sellers have been faced with a variety of challenges with shipping and fulfillment; in response, Tophatter created a program to allow qualifying sellers to receive weekly payouts so they can better manage their business and experiment with different shipping and fulfillment options.

All in all, they want to work with sellers as much as possible and are dedicated to creating a positive selling experience despite outside challenges.

How to Get Paid Early 

If you’re looking to get paid early — by early we mean the next-day, every day for your Tophatter sales — Payability is here to help. With Instant Access, you could get accelerated daily payouts on your Tophatter sales. What’s more, if you sell on other marketplaces, you can get those payouts in real-time, too. All you have to do is fill out a simple online application and connect your marketplaces and the other channels you sell on — we’ll look at your account health and sales performance and, if all looks good, you could start getting daily payouts as soon as tomorrow. 

There are no credit checks, no hidden fees, no cancellation fees, and no origination fees – just fast, friction-free financing. You can get approved in as little as 24 hours. Instant Access fees vary for Tophatter businesses based on which payment terms you are on along with other factors such as account health, sales performance, sales volume, and more. Once you sign up for Instant Access, you can either transfer all or a fraction of your balance to your bank account or spend it on the Seller Card and earn up to 2% cash back which can help mitigate your fees. In addition to Instant Access, Payability also offers Instant Advance, capital advances for inventory and marketing based on your future eCommerce sales (usually 75% to 150% of one month in marketplace sales revenue). Apply here to get started.