Selling on Amazon through Fulfillment by Amazon (FBA) involves several hidden costs that can quickly erode your margins. Understanding these numbers is critical for product sourcing and scaling a Private Label or Wholesale business.
Key FBA Metrics Explained
Referral Fee: This is Amazon's commission for selling on their platform. Most categories charge 15%, but it can vary from 8% to 45% depending on the category.
FBA Pick & Pack Fee: The flat fee Amazon charges to pull your item from the shelf, pack it, and ship it to the customer. This depends on the size and weight of your product.
COGS (Cost of Goods Sold): The total cost paid to your manufacturer to produce one unit of the product.
PPC/Marketing: The amount you spend on Amazon Advertising (Pay-Per-Click) divided by the number of units sold.
Example Calculation
Suppose you sell a kitchen gadget for $30.00.
Your manufacturer charges $7.00 per unit and shipping to an Amazon warehouse costs $1.00. Amazon's referral fee is 15% ($4.50), and the FBA fulfillment fee for this size is $5.00. You spend an average of $3.00 on ads per sale.
Typically, a healthy Amazon FBA business aims for a 25% to 35% net profit margin. A margin below 15% leaves very little room for price wars or unexpected increases in advertising costs.
function calculateAmazonProfit() {
var price = parseFloat(document.getElementById('fba_price').value) || 0;
var cost = parseFloat(document.getElementById('fba_cost').value) || 0;
var shipping = parseFloat(document.getElementById('fba_shipping').value) || 0;
var referralPct = parseFloat(document.getElementById('fba_referral_pct').value) || 0;
var fulfillment = parseFloat(document.getElementById('fba_fulfillment').value) || 0;
var storage = parseFloat(document.getElementById('fba_storage').value) || 0;
var ppc = parseFloat(document.getElementById('fba_ppc').value) || 0;
var misc = parseFloat(document.getElementById('fba_misc').value) || 0;
// Calculations
var referralFeeValue = price * (referralPct / 100);
var amazonFees = referralFeeValue + fulfillment + storage;
var totalExpenses = cost + shipping + amazonFees + ppc + misc;
var netProfit = price – totalExpenses;
var profitMargin = 0;
if (price > 0) {
profitMargin = (netProfit / price) * 100;
}
var roi = 0;
var capitalInvested = cost + shipping;
if (capitalInvested > 0) {
roi = (netProfit / capitalInvested) * 100;
}
// Display
document.getElementById('res_total_fees').innerHTML = '$' + amazonFees.toFixed(2);
document.getElementById('res_total_costs').innerHTML = '$' + totalExpenses.toFixed(2);
document.getElementById('res_net_profit').innerHTML = '$' + netProfit.toFixed(2);
document.getElementById('res_margin').innerHTML = profitMargin.toFixed(2) + '%';
document.getElementById('res_roi').innerHTML = roi.toFixed(2) + '%';
// Style colors based on profit
if (netProfit < 0) {
document.getElementById('res_net_profit').style.color = '#cc0000';
document.getElementById('res_margin').style.color = '#cc0000';
} else {
document.getElementById('res_net_profit').style.color = '#008a00';
document.getElementById('res_margin').style.color = '#008a00';
}
document.getElementById('fba_results').style.display = 'block';
}