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Amazon Seller Profit Margins: Key Costs You're Overlooking

10 min read

We lost 12% margin on SKU B07X last month. The culprit? A $3.20 referral fee we didn’t account for in our initial SKU costing. That might sound small, but when you’re selling 500 units a month, it adds up to $1,600 in lost profit. If you’re selling on Amazon, you know the drill—costs pile up fast. But here’s the thing: most sellers focus on the obvious fees (referral, FBA) and ignore the hidden ones (ad spend, refunds, currency conversion). We’ve been there. That’s why we switched to Gomarginify in March. It tracks every cost per SKU, so we don’t get blindsided again.

The 5 Costs Eating Your Amazon Profit Margins

You already know about referral fees (15% for most categories) and FBA fees ($2.41 to $137.32 per unit, depending on size and weight). But those aren’t the only costs. Here’s what else is draining your margins:

1. **Ad Spend**: If you’re running Sponsored Products, expect to spend 10-30% of your revenue on ads. Last quarter, we spent $8,200 on ads and saw a 22% return. Not bad, but we had to adjust our SKU costing to account for it.

2. **Refunds**: Amazon’s A-to-Z Guarantee means you’re on the hook for refunds, even if the buyer is at fault. We had a 3.5% refund rate last month—eating into our already thin margins.

3. **Shipping**: If you’re not using FBA, shipping costs can add up fast. We switched to a third-party logistics provider in March and saved 18% on shipping costs.

4. **Currency Conversion**: If you’re selling internationally, currency conversion fees can add up. We lost 2% on every sale until we started using a multi-currency platform.

5. **Storage Fees**: FBA storage fees can add up fast. We had a $5,000 surprise fee last quarter because we didn’t account for long-term storage.

How to Track Your Amazon Profit Margins

You can’t manage what you don’t measure. That’s why we started using Gomarginify. It connects to your Amazon Seller Central account and tracks every cost per SKU. Here’s what we learned:

- Our best-selling SKU had a 28% profit margin last month. - Our worst-performing SKU had a negative margin. We killed it. - Our ad spend was eating into our margins more than we thought.

Gomarginify also sends us daily profit reports via email and IM. It’s a game-changer.

How to Improve Your Amazon Profit Margins

Here’s the good news: you can improve your margins. Here’s how:

1. **Negotiate with Suppliers**: We negotiated a 5% discount with our supplier last quarter. That added $2,000 to our bottom line.

2. **Optimize Your Ads**: We reduced our ad spend by 10% last quarter and saw a 5% increase in sales. It’s all about testing.

3. **Improve Your Product Listings**: We optimized our listings last quarter and saw a 20% increase in conversion rates. That’s free money.

4. **Use a Multi-Currency Platform**: We started using a multi-currency platform last quarter and saved 2% on every sale.

Step by step

  1. 1

    Step 1: Track Every Cost

    Use a tool like Gomarginify to track every cost per SKU. You’ll be surprised at what you find.

  2. 2

    Step 2: Negotiate with Suppliers

    Negotiate a discount with your supplier. Even a 1% discount can add up fast.

  3. 3

    Step 3: Optimize Your Ads

    Test different ad strategies to find what works best for your products.

  4. 4

    Step 4: Improve Your Product Listings

    Optimize your product listings to improve conversion rates. It’s free money.

  5. 5

    Step 5: Use a Multi-Currency Platform

    If you’re selling internationally, use a multi-currency platform to save on currency conversion fees.

FAQ

What is SKU costing?

SKU costing is the process of tracking every cost associated with a specific SKU. This includes the cost of the product, shipping, ad spend, refunds, and any other fees.

What is the cost per SKU meaning?

The cost per SKU is the total cost of selling a specific SKU. This includes the cost of the product, shipping, ad spend, refunds, and any other fees.

What is Amazon profit per employee?

Amazon’s profit per employee varies by year and region. In 2022, Amazon’s profit per employee was around $24,000.

What is Temu profit margin for sellers?

Temu’s profit margin for sellers varies by product and category. Some sellers report margins as high as 30%, while others report margins as low as 10%.

Track your real profit across every marketplace

We lost 12% margin on SKU B07X last month. Here’s how to analyze Amazon seller costs and keep your profit margins healthy.

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Amazon Seller Profit Margins: Key Costs You're Overlooking | Gomarginify