So you’ve got 10 ASINs in your store. Maybe you have 100. Maybe you even have 10,000.
It’s certainly easy to track revenue. You can go anytime onto Amazon’s Business Reports section and pull it up.
Same with conversion rates, reviews, etc.
But what about profit?
The most important metric for your entire business is simply not available.
And for a good reason – Amazon doesn’t have your purchasing data. They don’t know what you paid for certain SKUs.
So how do you track this data? And how can you optimize the calculation of it, so that you can take meaningful actions to grow your business?
Today we’re going to look into just that.
I’m going to dive into how to understand SKU-level profits on Amazon, as well as go through a few tips and tricks on managing your own. So let’s get started.
Part 1: The Costs
To fully understand how profit works on Amazon, we’ve got to know the costs.
Now, of course, this is going to vary depending on your selling style.
If you advertise SKUs, you’re going to want to remove those costs from your calculation as well.
Here’s every cost you’ve got to know.
Gross Revenue
This is the entire sales revenue from your sale on Amazon, the top of the formula. What’s showing up on your seller dashboard?
Unit Cost
Part 2 is unit cost. How much did it cost from your vendor to purchase?
Inbound Shipping
How much did it cost to get that product from your vendor to you?
If you’re lucky enough to get prepaid freight, this one’s $0 🙂
Outbound Shipping
How much did it cost to get your product from your warehouse to the FBA Fulfillment Center?
Advertising
Did you have any advertising costs? These will need to be deducted from your profits as well.
Prep Costs
Do you polybag your items? Do you send them to a prep center? How much do SKU labels cost?
Printer cartridges – how many labels can you print with those?
How many label sheets do you use?
What about thermal labels?
How much do you spend on your warehouse team?
You’ll need to come up with an estimated prep number by tallying up all this spend, and dividing it by the amount of units you sell per month.
Do this every few months to reevaluate your costs. Add this as a form of variable-fee per unit.
Overhead Costs
Do you want to include rent, electricity, internet, software, etc. costs into your unit costs?
Just like prep, tally these up and divide them by the amount of units you move in a month.
Re-evaluate every few months – come up with a variable fee here.
Once you’ve got a good spreadsheet of all these numbers for a single unit, it’s time to go into fee calculation.
Part 2: Fee Calculation
Now that we’ve outlined all the parts above, we’ve got to understand your FBA fees.
We recommend only keeping one month of supply or so at the FBA fulfillment centers to lower your overall cost.
However, if you keep multiple months in, you’ll need to calculate your storage fees as well.
Referral fees are going to vary by category.
These are the main fees to look into, but you’ll want to look into long-term storage fees as well if you think you’ll incur those.
Part 3: Automating the Process
As you can see, there’s quite a bit of costs and fees out there!
So how do you keep track of all this?
You might be able to do Excel for a while, but that also can get complicated fast.
The best way to do this, at scale, is to automate it.
And that’s where ManageByStats comes in. It’ll handle all the major calculations for you, allowing you to see profits anytime at a glance.
ManageByStats also provides the option to enter your costs and additional expenses, which it then uses to make the profit calculation for individual products, groups of products or entire brands.
Part 4: Taking Action
Now that we’ve got all that done, it’s time to take action on the data you’ve just found out.
Which items aren’t doing so hot?
Can you raise their prices? Can you lower your wholesale costs? Shipping costs (inbound and outbound)?
How about ads? Are there any keywords that aren’t getting great performance?
There’s several areas you can look into to lower your overall unit cost and raise those SKU-level profits.
And, of course, if all attempts fail – perhaps ditch the SKU. There’s millions of other opportunities out there.
Focus on your best performers — it’ll only help your business in the long run.
