How to Calculate Amazon Profit Correctly
Revenue is not profit. Here is the complete breakdown of every cost you need to subtract to find your real Amazon margin.
Why Revenue and Profit Are Not the Same
Many new Amazon sellers look at their sales dashboard, see $10,000 in revenue, and assume they are making money. In reality, Amazon takes a significant cut before you see a penny. Between referral fees, FBA fees, storage costs, cost of goods, and shipping to Amazon, your actual profit could be anywhere from 40% of revenue to negative. Knowing the difference is the first step to building a sustainable business.
Net Profit = Selling Price − Referral Fee − FBA Fee − Storage Fee − COGS − Inbound Shipping − Advertising − Other Costs
Your net margin % = (Net Profit / Selling Price) × 100. Most experienced sellers target 25–35% net margin after all costs including advertising.
Every Cost Component Explained
1. Referral Fee
Amazon charges a percentage of the total sale price on every unit sold. The rate depends on the product category. Most categories pay 15%, but some like personal computers pay 6% and others like Amazon device accessories pay 45%. For the majority of private-label sellers, plan on 15%.
2. FBA Fulfillment Fee
If you use Fulfillment by Amazon, you pay a per-unit fee that covers picking, packing, and shipping to the customer. The fee is based on the product size tier and weight. A small standard-size item under 1 lb typically costs around $3.22. A large standard-size item between 1–2 lb runs roughly $5.90. Oversize items start around $9.73 and go up from there.
3. Monthly Storage Fee
Amazon charges per cubic foot per month for inventory stored in their warehouses. Standard-size storage costs about $0.87 per cubic foot from January to September, then jumps to $2.40 per cubic foot from October to December during the holiday peak. If inventory sits for over 180 days, you may also face aged inventory surcharges.
4. Cost of Goods Sold (COGS)
This is what you actually pay to manufacture or purchase the product. Include the unit cost, packaging, labeling, and inspection fees. If your supplier charges $4.00 per unit, your packaging costs $0.30, and labeling adds $0.10, your total COGS is $4.40 per unit.
5. Inbound Shipping to Amazon
Getting your product from your supplier (or your warehouse) to Amazon's fulfillment centers is another cost. Sea freight from China for a standard carton typically works out to $0.50–$2.00 per unit depending on product size and weight. Domestic trucking or partnered carrier fees add more.
6. Advertising Spend
Most sellers run PPC ads. If you spend $500 on advertising and sell 200 units, your ad cost per unit is $2.50. This number varies widely, but you cannot ignore it when calculating profit.
7. Other Costs
Returns (Amazon charges a return processing fee on some categories), software subscriptions, product photography, and your $39.99/month Professional Seller account fee all eat into margins.
Worked Example: $29.99 Kitchen Gadget
Here is every cost broken down for a product selling at $29.99, so you can see exactly how margin is built up (or eroded) line by line.
| Cost Item | Calculation | Amount |
|---|---|---|
| Selling price | — | $29.99 |
| Referral fee (15%) | $29.99 × 15% | −$4.50 |
| FBA fee (small standard, ~14 oz) | Size/weight tier | −$3.86 |
| Monthly storage (per unit) | Allocated share | −$0.20 |
| COGS (unit + packaging + label) | $5.50 + $0.30 + $0.10 | −$5.90 |
| Inbound shipping per unit | Sea freight allocation | −$1.10 |
| Advertising per unit | $300 spend / 100 units | −$3.00 |
| Other costs per unit | Returns, software, etc. | −$0.50 |
| Net profit per unit | $29.99 − $19.06 | $10.93 |
| Net margin | $10.93 / $29.99 | 36.4% |
A 36.4% net margin is healthy. It leaves room to run PPC, absorb occasional returns, and still bank meaningful profit per unit.
- Forgetting advertising costs. PPC spend is a real cost. Leaving it out makes your margin look better than it is— sometimes by 10–20 percentage points.
- Ignoring storage fees. Slow-moving inventory racks up monthly storage charges that silently erode profit. Q4 rates nearly triple.
- Using factory price instead of full COGS. Always include packaging, labels, inspection, and any prep fees—not just the per-unit supplier price.
- Not accounting for returns. Depending on your category, 2–10% of units may be returned. Factor in return processing fees and unsellable inventory write-offs.
How to Track Profit Ongoing
Calculate profit per SKU at launch to set your pricing. Then review monthly using actual numbers from your Seller Central reports. Your advertising costs, storage fees, and return rates will change over time. A product that was profitable at launch can become unprofitable if you do not monitor these inputs.
Instead of building your own spreadsheet, use the FBA Profit Calculator to enter your selling price and costs and instantly see net profit, margin, and break-even ACOS. Recalculate any time fees or COGS change.