Selling on Amazon via Fulfillment by Amazon (FBA) is a powerful way to scale an e-commerce business, but the fee structure can be complex. To truly understand if a product is viable, you must look beyond the gross sales and dive deep into the net margins.
Key Components of FBA Fees
Referral Fee: This is Amazon's commission for selling on their platform. It usually ranges from 8% to 15% depending on the category.
Fulfillment Fee: A flat fee per unit based on the weight and dimensions of your product. This covers picking, packing, and shipping.
Monthly Storage: Fees based on the volume (cubic feet) your inventory occupies in Amazon's warehouses. This fluctuates between peak and off-peak seasons.
Example Calculation
If you sell a "Yoga Mat" for $40.00:
Product Cost: $10.00
Shipping to Amazon: $2.00
Referral Fee (15%): $6.00
Fulfillment Fee: $7.50
PPC Ads: $4.00
Your total costs are $29.50. Your Net Profit would be $10.50 per unit, representing a 26.25% Net Margin and a 105% ROI on your initial inventory investment.
How to Improve Your Margins
To maximize your Amazon FBA profit, consider optimizing your packaging to reduce dimensions (lowering fulfillment fees), negotiating better rates with suppliers, or improving your PPC conversion rate to lower the marketing cost per unit.
function calculateFbaProfit() {
var salePrice = parseFloat(document.getElementById('fba_sale_price').value) || 0;
var itemCost = parseFloat(document.getElementById('fba_item_cost').value) || 0;
var shippingInbound = parseFloat(document.getElementById('fba_shipping_inbound').value) || 0;
var referralPercent = parseFloat(document.getElementById('fba_referral_fee').value) || 0;
var fulfillmentFee = parseFloat(document.getElementById('fba_fulfillment_fee').value) || 0;
var storageFee = parseFloat(document.getElementById('fba_storage_fee').value) || 0;
var adsCost = parseFloat(document.getElementById('fba_ads_cost').value) || 0;
var otherCosts = parseFloat(document.getElementById('fba_other_costs').value) || 0;
// Logic for Amazon Fees
var referralFeeValue = salePrice * (referralPercent / 100);
var totalAmazonFees = referralFeeValue + fulfillmentFee + storageFee;
// Logic for Total Costs
var landedCost = itemCost + shippingInbound + adsCost + otherCosts + totalAmazonFees;
// Logic for Profit and Margins
var netProfit = salePrice – landedCost;
var netMargin = (salePrice > 0) ? (netProfit / salePrice) * 100 : 0;
var roi = (itemCost > 0) ? (netProfit / itemCost) * 100 : 0;
// Display results
document.getElementById('res_total_fees').innerHTML = '$' + totalAmazonFees.toFixed(2);
document.getElementById('res_landed_cost').innerHTML = '$' + landedCost.toFixed(2);
var profitElement = document.getElementById('res_net_profit');
profitElement.innerHTML = '$' + netProfit.toFixed(2);
if (netProfit >= 0) {
profitElement.className = 'result-value profit-positive';
} else {
profitElement.className = 'result-value profit-negative';
}
document.getElementById('res_margin').innerHTML = netMargin.toFixed(2) + '%';
document.getElementById('res_roi').innerHTML = roi.toFixed(2) + '%';
document.getElementById('fba-results').style.display = 'block';
}