Most, if not all, Amazon sellers have a tough time figuring out their true profitability on Amazon. Whether you are just starting out in this massive marketplace or a seasoned seller with a solid customer base, having a clear understanding of how much money you are exactly making is pivotal to the success of your business – although, we must admit, that it can be quite a challenge to take.
Hundreds (if not, thousands) of new products are added every day in the Amazon marketplace. When it comes to active sellers, there are more than a million registered. The stats prove how fierce the competition is and beating it is not an easy feat. If you want to maximize the growth opportunities for your Amazon business, you must know the factors that affect your profitability. These may include fulfillment fees, cost of goods, logistics, PPC ads cost, and so many more. It is also essential to use Amazon seller profit analytics software so you get valuable insights into your cash flow, profit margin, sales revenue and more.
Evaluating Your True Profitability on Amazon
To effectively measure your true profitability on Amazon, you must analyze every area of your Amazon business. Here’s a quick overview on how you can determine your profitability per SKU as described by Big Commerce.
Direct Costs
These are considered the brains of your business. This is what you use to determine baseline cost and margins, per SKU across all channels. They include:
- Acquisition costs per SKU
- Inbound and outbound shipping
- Wholesale costs
Without a baseline cost, you might struggle coming up with a profitable decision for your brand.
Indirect Costs
These are considered the heart of your business. These are mostly nonproduct related expenses, including:
- Utilities
- Insurance
- Bookkeeping
- Payroll and benefits
- Business travel
- Corporate business tax
- Product samples
- Warehouse costs
- And everything included in your overhead cost allocation
Without these functions, your business would be missing its pulse.
Amazon Fees
These are considered the lungs of your business. These fees are what will keep your business floating in the wavy waters of Amazon, including:
- Amazon sales commission
- FBA fees
- FBA inbound shipping fees
- Commission on return product
- Storage fees
- Return shipping costs (both from customer to Amazon fulfillment centers and from fulfillment centers to you)
- Returns disposal costs
Refusing to pay for most of these costs may sink your brand.
Returns-related Costs
This is where you digestive feedback loop comes into play. Are your customers happy? Did your product meet their expectations? You’ll know the answer if you’re having to regurgitate too much in terms of cost for handling returns once they are received. These may include what write-down or write-off costs you have by not being able to sell returned products as new condition products.
Invest in high-quality Amazon seller profit analytics software
Getting a solid solution that could help track your profit performance is a wise idea. Our Amazon seller profit analytics tool monitors and analyzes the different variables that could affect the profitability of your Amazon business. Using the Profit and Sales Analysis Tool, you will be able to track order revenue, estimated profit and gross margin using the following metrics:
- Orders & Units
- Cost of Goods Sold (COGS)
- Processing Cost
- FBM Shipping Costs
- PPC Ads Cost
- Sales Tax
- Promo
- Refunds
- Fees
- FBA Storage Fees
- Return on Investment (ROI)
- PPC Advertising Cost of Sales (ACoS)
- PPC Total Advertising Cost of Sales (TACoS)
A dynamic chart makes it easy to understand where exactly your money is going and how much you are earning in return. There is no need to calculate your true profitability manually. The Lost Sales Analysis Tool, on the other hand, tells you how much you are losing per item due to out-of –stock. It also forecasts potential lost sales to help you replenish adequately and keep your inventory health in top condition. Among the many features of the SellerMobile app, the Dashboard allows you to quickly and easily assess the sustainability of your business in one place.
If you want to learn more about our Amazon seller profit analytics software as well as how SellerMobile can track and calculate your true profitability on Amazon, and help you stay on top of the competition, sign up for a free 30-day trial. You may also contact us and schedule a demo so we can walk you through our different tools.
