This is an important question to ask as you need to understand ahead of time if a product you are considering selling will generate a good net profit on Amazon FBA.
And you’re in luck because in order to do this you can use the Amazon Profit Margin calculations for Seller Central (not Vendor) which will help you make informed sales decisions.
Now let’s dive into what the Amazon profit calculations are and based on the different fees.
What is the Amazon Profit Margin Calculator?
While you may think this is a specific calculator that Amazon provides, it’s not – It’s a basic formula for calculating your profit margin at the product level.
Here is the calculation:
Subtract all costs associated with the sale of your product and the corresponding Amazon Fees from your sales price to get your profit, then divide by the sales price and multiply by 100%.
This will give you a percentage that represents your profitability, and the higher percentage the better, of course.
The set of costs that you add together to calculate the net profit of your products considering the following Amazon fees:
This is a percentage of the sale price that Amazon charges for each item sold and the referral fee is based on the category of the item being sold and can range from 7% to 45% of the sale price. The total sales price is the total amount paid by the buyer, including the item price and any delivery or gift-wrapping charges.
- You can determine which fee category pertains to a specific product by accessing this list!
- See what referral fee is applied to each category by accessing this page 🔥
FBA fulfilment fees
FBA fees cover storing, picking, packing, and shipping the item. The fulfilment fees are based on the package size and weight of the products being sold. To access the FBA fees, please refer to the Google sheet file that has been shared with you. The tabs with the fees are initially hidden, but you can unhide them by clicking on the three horizontal lines and selecting the tab name you wish to view. Once you click on it, the tab will appear alongside the other unhidden tabs.
Monthly storage fees
Inventory Storage Fees are charged between the 7th and 15th day of the month following the month the fee applies, and it’s calculated based on cubic feet of each product.
Are you looking at this and thinking “This is going over my head” or “This sounds tedious to do manually”? Don’t worry! We have this downloadable PDF that can do the calculation for you and an explanation below on how to fill it out correctly.
How to fill in the Amazon profit margin calculator for the UK
The tabs for the other countries follow a similar pattern and for US we have created separate guidelines which you can find in the instructions tab.
There are two types of columns in the profit margin calculator: yellow columns that need to be filled in and green columns that automatically update once the yellow columns are entered.
Step 1: Columns A:D are intended to identify the product.
- Column A: Insert the parent ASIN (if applicable)
- Column B: Insert the child ASIN
- Column C: Insert the SKU
- Column D: Insert the product name
- Once the child ASIN is inserted, the Amazon URL is automatically generated (Column E)
Step 2: Columns F:G are going to be used to calculate your sale price excluding the VAT.
- Column F: Insert the sale price (inc. VAT) that you’re going to use to sell on Amazon
- Column G: Insert the VAT rate that is used in the country where you’re selling your item. Find the standard rates below:
- VAT UK: 20%
- VAT DE: 19%
- VAT FR: 20%
- VAT IT: 22%
- VAT ES: 21%
- Once the sale price and VAT values are inserted, the sales price exc. VAT is automatically generated (Column H)
Step 3: Insert the Cost of Goods in Column I.
Step 4: Columns J – M is going to be used to calculate Amazon FBA fees and monthly storage fees that will depend on the packaging dimensions and weight of your products.
- Column J: Insert the Longest Side of the package in cm
- Column K: Insert the Median Side of the package in cm
- Column L: Insert the Shortest Side of the package in cm
- Column M: Insert the weight of the package in grams
- Once these values are inserted, the calculator will determine the parcel size of your package (Column Q) and the weight that Amazon uses to calculate its fees (Column P). With this information, the Amazon FBA fees (Column S) and monthly storage fees (Column W) are automatically calculated.
Step 5: Insert the Amazon Referral fee % in Column X that Amazon will charge for each item sold. With this value, the Amazon Referral fee is automatically updated (Column Y).
At this point, Columns Z:AC are already calculated.
- Column Z refers to the Total Amazon Fees, which include all fees associated with the sale of a product. It’s the sum of the Amazon FBA fee, Monthly Storage Fee, and Referral Fee.
- Column AA refers to the Total Cost associated with the sale of your product. It’s the sum of the Cost of Goods and Total Amazon Fees
- Column AB refers to the Net profit associated with the sale of your product. It’s the Sales price (exc. VAT) minus the Total Cost
- Column AC refers to the Net profit margin of your product. It’s the weight of the net profit over the Sales price (exc. VAT).
Step 6: Insert the Target TACOS you want to use for each product in Column AD. With this value, the Net Profit Margin After Ads (Column AE) is going to be automatically updated.
Tips for improving your profit margin on Amazon
So, you’ve used our calculations and you have your percentage back, it’s pretty low how can you get this a little higher so you get more ££ profit for your products? Well, here are some tips:
1. Packaging efficiencies: Look at ways to optimize product packaging to minimize dimensions and weight while maintaining product protection. Custom-sized boxes and eliminating unnecessary packaging materials can reduce FBA fees. Additionally, sellers can check their product eligibility for the FBA Small and Light as their products may qualify for reduced FBA fees.
2. Verify FBA product measurements: You can request Amazon to remeasure and reweigh items if sellers suspect incorrect dimensions or weight. Correct measurements can lead to decreased FBA fees and potential reimbursements for overcharged fees.
3. Offer packs and bundles: Increase the average order value by bundling products together! Selling them as a bundle incurs only one FBA fee, compared to separate listings with separate FBA fees.
4. Optimize TACOS: Continuously refine and optimize Amazon advertising campaigns to maximize ROI and reduce advertising costs.
These are some strategies that can help increase the profit margin quickly! Some long-term solutions include pricing optimization, supplier negotiations, supply chain and operational efficiency improvements.
The Amazon Profit Margin Calculator is a tool that you should utilize for every product as it will help you to spot which products have the biggest ROI, and which products don’t and allow you to review the associated costs to see if there are any opportunities for cutting costs and improving the overall profit margin %.
Need some help?
We have created this Amazon Profit Margin Calculator, that’s free to download and use straight away. If you need help understanding how to use it or want details on how you can improve your ROI, don’t hesitate to send us a message or give us a call.