The three margins
Margin before ads
(Price − Amazon fees − unit cost) ÷ priceYour break-even ACOS. The ceiling on what ads can cost.Margin after ads
(Price − Amazon fees − unit cost − ad spend per unit) ÷ priceWhat each sale actually earns.Net margin
Margin after ads − storage, refunds and overheadsWhat the business keeps.Most seller dashboards show one of these and call it profit. Knowing which one you are looking at is half of reading it. Run one product.
Costs that get left out
- Freight and duty to get stock into Amazon's warehouses: part of unit cost, often typed as the factory price alone.
- Refunds. The refunded sale, the refund administration fee, and units that come back unsellable.
- Storage, which grows with every unit that does not sell, and the aged inventory surcharge on the ones that sit.
- Ad spend by product. An account-wide ad total spread evenly hides the product whose ads cost more than its margin.
- Promotions and coupons, which lower the price the referral fee and the margin are calculated on.
Why per product, and why weekly
An account can be profitable while one product loses money on every sale, and the account total will not show it. Read margin after ads per product, weekly, and the problem surfaces in days instead of at the end of a quarter.
When margin after ads falls, the cause is almost always one of three: ad spend rose faster than sales, the price fell, or a fee changed. Each has a different fix. The weekly PPC audit handles the first.
Questions
- Is it profitable to sell on Amazon?
- It can be, product by product. Subtract the referral fee, FBA fee, unit cost and ad spend from the price; if a healthy share is left, the product is profitable.
- What is a good profit margin on Amazon?
- Many sellers aim for a margin after ads of 15% to 30%, but the right number depends on how much you reinvest in growth. A margin before ads under 20% leaves little room to advertise.
- How do I calculate profit per unit on Amazon?
- Price minus the referral fee, the FBA fee, your landed unit cost and your ad spend per unit. The FBA profit calculator does it for one product.
Keep going
Free toolsAmazon FBA profit calculatorProfit per unit, margin and breakeven ACOS from your price, cost and FBA fee.GuidesAmazon seller fees, explainedEvery fee on an Amazon statement, what triggers it and how to lower it.GuidesWhat is a good ACOSWhy a good ACOS depends on margin, and how to set your own target.GuidesACOS vs TACOSWhat TACOS measures that ACOS cannot, and how to read the two together.