The formula
Profit per unit = selling price - cost of goods - Amazon referral fee - fulfilment fee (FBA) or shipping cost (FBM) - storage and other per-unit fees - returns allowance - advertising cost per unit.
Margin = profit per unit / selling price.
A worked example
- Selling price: $40.00
- Cost of goods landed at your warehouse: $11.00
- Referral fee (category percentage of price): for example $6.00
- FBA fulfilment and storage per unit: $6.50
- Returns allowance (refunds and unsellable returns): $1.00
- Profit before ads: $15.50, a 38.8% margin
- Ad spend per unit sold (ad spend / total units): $5.00
- Profit after ads: $10.50, a 26.3% margin
Where the numbers come from
- Cost of goods: your supplier invoices, plus freight and duty, spread over the units. This is the number most sellers do not keep per SKU, and the one that breaks every profit report when it is missing.
- Fees: Amazon settlement and fee reports show the actual fees charged per order.
- Returns: the returns report, valued at what you could not resell.
- Ad spend: the advertising reports, allocated to the SKU that was advertised, not the account total.
Why ACOS alone misleads
ACOS divides ad spend by ad sales. It ignores everything between the price and your bank account. Two products at the same 20% ACOS can have very different profit: one with a 45% margin before ads, one with a 22% margin. Compare ACOS with break-even ACOS (your margin before ads) for each SKU.
Habits that keep the numbers honest
- Enter cost of goods for every SKU, and update it when a new shipment lands at a different cost.
- Review profit per SKU monthly, and look first at SKUs with high sales but low or negative profit.
- Check that variation children and bundles carry their own cost, not the parent's.
- Reconcile your report with the settlement payout once a month.
Quick answers
What costs reduce Amazon profit besides fees?
Cost of goods, shipping or fulfilment, storage, returns, advertising, coupons and promotions, and prep or inbound costs.
How do I find profit per SKU?
Subtract cost of goods, Amazon fees, shipping or fulfilment, returns and the SKU's own ad spend from its sales, using actual order and settlement data.
Keep reading
- What is ACOS on Amazon, and what should yours be?
- Advertising on Amazon, eBay and Walmart: how the models differ
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