If you are selling products on Amazon FBA, one of the most important management tasks is to find out your profitability.
During the product research phase, you will need to do some research and calculations to estimate the potential of a product before launching it. You will need to take into account initial investment costs, Amazon Logistics costs and estimated sales.
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What is Amazon’s FBA service?
Amazon’s FBA service, also known as Fullfilment By Amazon, consists of handing over the management of the storage and shipping of products to Amazon’s own platform.
The FBA service bundles all these tasks:
Delivery of the goods by the merchant
Packaging and labelling of the goods
Distribution of the goods to the various FBA warehouses
Placement in the warehouses and possible stock transfer
Picking, packing and labelling
Scanning and posting of all goods/stock movements
Amazon FBA service costs
Before launching our product, we need to understand what costs we will incur if we are part of the FBA service. .
We can find 3 types of costs:
Initial costs: they are all those essential to start our business (samples, cost of goods, shipping, photography of the products).
Variable costs: all those that will depend on our sales volume and the amount of products we have in stock (Amazon Logistics fees, storage fees, returns, etc.).
Marketing costs: these are all the costs we will have in terms of advertising and promotion of our products (promotions and pay per click). The main objective is to increase sales and therefore the profits of the business.
Depending on what your objectives are, you can choose from an infinite number of possibilities and combinations to find the one that suits you best.
Are there any additional costs?
Like any business, during the development of our activity we may encounter some additional costs.
Often, there are “other” small costs that go unnoticed. Returns, disposal costs, return postage and cancellations can generate significant additional costs to consider.
We also need to think about business costs, such as insurance, payroll, taxes and travel.
The Amazon FBA calculator
Amazon has a handy calculator that is very useful for any Amazon FBA seller. This tool allows you to find out how much you will pay to use Fulfillment by Amazon for any given product.
The revenue and cost calculator is a preview feature that allows you to compare revenue estimates for products based on the logistics management channel being used.
You can easily see the rates that apply to each logistics management option and enter an estimate of the sales volume. This data will help you calculate total revenue and estimates of products sold per unit.
How to use the calculator
Enter price and shipping details. If you select an existing product, the price and shipping details will be automatically populated from the offer highlighted on the product details page. For products that have not yet been published, you can update the product price and shipping costs from the seller’s logistics management at any time.
Enter cost estimates. For accurate per-unit profit estimates, enter an estimate of the cost of goods sold for each logistics management option. Include the estimated logistics management costs and any other fees you plan to incur.
Compare rates and profitability of a third programme. Open the Select the programme you want to compare menu to choose a third set of rate and profitability estimates to compare with. If the programme is changing rates soon, multiple rate estimates may be available for the same programme.
Adjust the fields you want to explore. Each time you change a field, the estimated fee and net profit values will be recalculated.
Relationship with Epinium
With Epinium’s software you can make a stock forecast of up to 7, 14 or 30 days. We give our customers the option of having a much more personalised stock forecast than the one provided by Amazon.
With this tool you will be able to increase the rotation of the products in your warehouse. You will have lower costs and it will help you to increase your Inventory Performance Index (IPI).
Optimise your Amazon account with Epinium to increase your organic sales!
In conclusion, we hope you found this article useful, do not hesitate to contact us if you have any questions.
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