Calculating your potential earnings on Amazon is critical for the success of any e-commerce business. The "Fulfillment by Amazon" (FBA) model offers convenience but comes with a complex fee structure that can quickly erode your margins if not calculated properly.
Core Components of the FBA Calculation
Cost of Goods Sold (COGS): This is the manufacturing or purchase price of your product. For accurate accounting, include any inspections or labeling costs incurred at the factory.
Referral Fee: Amazon charges a percentage of the total sales price for every item sold. Most categories range between 8% and 15%.
Fulfillment Fee: This covers the picking, packing, and shipping of your orders. This fee depends heavily on the product's weight and dimensions.
Inbound Shipping: Often overlooked, this is what it costs you to ship your inventory from your warehouse or supplier to an Amazon Fulfillment Center.
Example Calculation for a Private Label Product
Imagine you are selling a yoga mat for $35.00. Your manufacturing cost is $8.00 and shipping to Amazon costs $1.50 per unit.
Amazon's referral fee for the category is 15% ($5.25). The FBA fulfillment fee for a large standard-size item is roughly $6.50. After subtracting all these costs from the $35.00 sale price, your net profit would be $13.75 per unit. This results in a profit margin of 39.3% and a high ROI of 144% based on your $9.50 total investment per unit.
How to Improve Your FBA Margins
To increase your bottom line, focus on Packaging Optimization. Moving a product from "Large Standard Size" to "Small Standard Size" by reducing package dimensions by just half an inch can save you several dollars per unit in FBA fees. Additionally, increasing your order volume with suppliers can lower your COGS through economies of scale.
function calculateFBAProfit() {
var salePrice = parseFloat(document.getElementById("salePrice").value) || 0;
var itemCost = parseFloat(document.getElementById("itemCost").value) || 0;
var shipToAmazon = parseFloat(document.getElementById("shipToAmazon").value) || 0;
var referralRate = parseFloat(document.getElementById("referralFeeRate").value) || 0;
var fbaFee = parseFloat(document.getElementById("fbaFee").value) || 0;
var storageFee = parseFloat(document.getElementById("storageFee").value) || 0;
// Logic for Referral Fee (Price * Rate%)
var referralFeeTotal = salePrice * (referralRate / 100);
// Total Amazon Fees
var totalAmazonFees = referralFeeTotal + fbaFee + storageFee;
// Total Expenses
var totalCosts = itemCost + shipToAmazon + totalAmazonFees;
// Net Profit
var netProfit = salePrice – totalCosts;
// Margin (Profit / Sale Price)
var margin = (salePrice > 0) ? (netProfit / salePrice) * 100 : 0;
// ROI (Profit / COGS + Shipping to AMZ)
var investment = itemCost + shipToAmazon;
var roi = (investment > 0) ? (netProfit / investment) * 100 : 0;
// Update UI
document.getElementById("resNetProfit").innerHTML = "$" + netProfit.toFixed(2);
document.getElementById("resMargin").innerHTML = margin.toFixed(2) + "%";
document.getElementById("resROI").innerHTML = roi.toFixed(2) + "%";
document.getElementById("resTotalFees").innerHTML = "$" + totalAmazonFees.toFixed(2);
document.getElementById("fba-results").style.display = "block";
// Color coding for profit
if (netProfit < 0) {
document.getElementById("resNetProfit").style.color = "#d9534f";
} else {
document.getElementById("resNetProfit").style.color = "#28a745";
}
}