Amazon has an “FBA revenue calculator” to help sellers make decisions about how they use Fulfillment by Amazon. On Friday, it published a post showing sellers how they could use it to “remove some of the guesswork” from calculating costs and comparing FBA options.
Amazon explained, “The profit calculator generates side-by-side comparisons for various fulfillment options, whether you store, pack, and ship orders yourself, or use a service like FBA. Play around with different numbers for factors like sales price and costs for storage, shipping, and fulfillment. The calculator will then give you estimates depending on what stores you want to sell in.”
The calculator takes into account common fees like referral fees, fulfillment costs, monthly storage costs, and variable closing fees. Sellers have to use the “Miscellaneous cost” field to add their other types of expenses, such as long-term storage costs, removal order costs, and return processing costs.
Amazon also linked to its Sales Estimator calculator to help sellers with their FBA calculations. Clearly being too optimistic (or pessimistic) about future sales can provide an inaccurate picture.
While the calculator can’t determine profitability without knowing how much sellers paid for their inventory, it does have a Cost of Goods Sold field so sellers can enter the information (or they can leave it blank and continue the calculations offline).
The calculator compares FBA to other fulfillment services where there are fields for sellers to include costs such as labor, packing materials, shipping, customer service.
An Amazon Seller University video from last year explaining the calculator used an example where the seller intended to store 30 items with a $15 price tag with expectations of selling 15/month. Using Amazon FBA, the seller would see a 20.39% profit margin versus a negative 30.56% margin (a loss) – without even factoring in the cost of the goods sold.
But the beauty of the calculator is that you don’t have to take Amazon’s word for it, you can plug in the numbers you get from a rival fulfillment service (or your own costs) and compare the margin yourself.
Not sure if it makes sense to use Amazon’s FBA Small and Light program? You can plug those numbers into the calculator to compare costs.
In Friday’s post, Amazon also touched on pricing, advising sellers to consider the question, “Could you make more money if you raised or lowered prices?” It advises sellers to consider taking the following actions:
- Perform product research. As you analyze your competition, keep track of the upper and lower ranges of prices for similar products.
- Consider how a product adds value compared to other options out there. If it’s higher quality or solves a problem, customers might be willing to pay more.
- Use a tool like Product Opportunity Explorer to study price trends, along with resources like Amazon Brand Analytics to get insights into customer behavior and purchase patterns.
While sellers may have gone through this exercise when initially deciding how to fulfill their products, costs have risen significantly faster in recent years. As sellers do their end-of-year planning for the New Year, they may want to do the math again, with or without Amazon’s FBA calculator. Too busy with holiday sales (a nice problem to have)? Jot it down in your calendar to find time to break out your inner accountant and check your assumptions about your profitability.
