Do you really know your Amazon profits? [Guest post]
This is a guest post from Michael, an Amazon seller and co-founder of amzcontrol.com - a German startup, which is focused on building the world's best profitability analytics service for Amazon Sellers.
How to sell 50 units in one day on Amazon, but still lose money
Strange as it may seem, this is a real example where a seller sold 50 units in one day, but actually lost money.
The reason in this case was Amazon’s storage fees.
Storage fees are applied once a month and most sellers neglect them when calculating their profit.
Sellers utilizing the FBA (Fulfillment by Amazon) program must pay storage fees on their inventory in Amazon’s warehouses.
The current prices for US-based warehouses vary by time of the year and product size - standard or oversize products (more information about product size here).
- $0.64 per cubic foot standard size; and
- $0.43 for oversize products
- $2.35 per cubic foot standard size; and
- $1.15 for oversize products
Note: from April 1, 2018 each rate will be increased by $0.05.
On top of this, there are also long-term storage fees that are applied to items stored longer than 6 or 12 months ($11.25 and $22.50 per cubic foot respectively). These fees are charged bi-annually, on February 15 and August 15.
However, from September 15, 2018, long-term storage fees will be charged on a monthly basis:
- $3.45 per cubic foot for items stored in fulfilment centers from 181 up to 365 days; and
- $6.90 per cubic foot for items stored in fulfilment centers for more than 365 days.
The full financial impact of product returns
Besides storage fees, Amazon sellers have a difficult time calculating the impact of product returns. There are a lot of variables to account for, which makes them tricky to quantify. However, they can have a significant impact on profitability and should not be ignored.
So how do you calculate returns correctly?
Amzcontrol takes all returns into account automatically - let's see how in our example below.
Let's describe all of the components (highlighted in the red box):
- Product (€1,207.99) - money refunded to customers for their purchases
- Refund commission (€31.60) - Amazon fee for handling returns
- Commission (€157.98) - Amazon returns to us their referral fee, which they charge for all sales
- Shipping / Shipping chargeback (€-33.68/€28.29) - refund for shipping paid by the customer, which is subtracted from the seller's balance, and refund for the shipping chargeback, which is added to the seller's balance.
- Product cost (€+316.17) - if the returned product is “sellable”, amzcontrol will calculate this with a plus sign, so this sum is added to your balance. If the unit is returned broken, it’s cost will not be calculated with a plus.
In summary, there are a number of fees charged by Amazon that many sellers don't take into account when considering their pricing and profitability.
It's easier to use a software like amzcontrol that:
- Visualizes all of your data;
- Takes all amazon fees into account automatically;
- Accounts for changes in pricing; and
- Reflects your monthly or one-off costs (e.g. virtual assistant or photography).
This will help you determine how profitable your Amazon FBA business really is!
Special offer for AMZ Europe readers
And to wrap things up, I have a special offer for AMZ Europe readers!
I'm happy to offer 2 months of amzcontrol for free - you can avail of this offer by using this special link.
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