Your real Amazon margin: how to work out what you actually keep

If your Amazon profitability model fits into three subtractions, it is wrong. Between the price the customer sees and the money that stays in your account there are eight to twelve line items, and half of them never appear in the sales report you check every morning. The usual outcome: brands convinced they run at 25% who are actually at 8%, and some sitting below zero on their best sellers.

Start from the net figure, not the shelf price

The first mistake is basic accounting. If you sell at €34.90 including VAT, your revenue is not €34.90. It is the net figure: €34.90 divided by 1.21 (at a 21% VAT rate) is €28.84. The other €6.06 is not yours, it belongs to the tax authority.

This matters more than it looks, because Amazon calculates the referral fee on the total selling price including VAT, while you calculate margin on the net figure. Mix the two and your percentage is inflated from the very first line. VAT rates differ by marketplace, so use the one that applies to where the sale happens.

Rule: revenue net of VAT. Amazon's charges exactly as Amazon bills them. Never mix the two scales.

Everything you have to subtract

This is the full list. If any of it is missing from your sheet, your margin is fiction:

• Category referral fee. The percentage Amazon takes on each sale, which varies by category and, in some, by price band. Confirm the exact percentage for your category in Seller Central: it changes more often than people assume.
• Fulfilment cost. Under FBA, the per-unit fee based on weight and dimensions. Under FBM, the true cost of picking, packing, box, void fill and carriage. Plenty of FBM sellers use a round shipping figure and forget the packaging materials and the warehouse labour.
• Storage and surcharges. Monthly storage per cubic metre, aged inventory surcharges and stock-level surcharges. Allocate them per unit sold. Do not ignore them because they arrive on a separate invoice.
• Cost of goods. Not what the supplier invoices you. That plus freight, duty, insurance, customs clearance, inbound handling into your warehouse and shrinkage. On imported goods the real landed cost is commonly 20-35% above the factory price.
• Allocated advertising. What you spend on Amazon Ads, attributed to that specific product.
• Returns. Their real cost, which is not zero even when the unit goes back on the shelf.
• Relabelling, prep and refurbishment. Polybags, barcode labels, tape, and the labour of recovering returned stock.
• Coupons and promotions. The discount applied plus, for coupons, the redemption fee. That is a variable cost of the SKU, not a generic marketing expense.
• Subscriptions and services. Professional seller fee, tools, external management. These hit net margin, not contribution margin.

The minimum spreadsheet

One row per SKU and these columns, in this order: price including VAT, net price, referral fee, fulfilment cost, allocated storage, full cost of goods, allocated advertising, return cost, promotions, contribution margin in euros, contribution margin as a percentage, units sold in 90 days, and total contribution in euros.

That last column is the one that matters. Sort by it and you get the real picture of which products hold the account up and which ones live off the others.

Allocate advertising by ASIN, never in equal shares

Splitting the month's ad spend evenly across every line is the fastest way to hide a loss-making product behind a best seller. In a typical account, three or four ASINs take most of the budget. An even split hands them profitability they have not earned and steals it from the products that sell organically on their own.

The metric that helps here is TACoS (what you spend on ads against ALL of that product's sales, not just the ad-attributed ones). Classic ACoS only looks at the sale the ad gets credit for, which makes a campaign look healthy when it is in fact cannibalising organic sales.

How to allocate it properly:

1. Download spend by campaign and ad group for the last 30 or 90 days.
2. Map each campaign to its ASIN. Multi-product campaigns get split by each ASIN's real spend inside the campaign, which you get from the targeting report.
3. Divide that spend by the total units sold of that ASIN in the same period. That is your ad cost per unit.
4. Allocate brand spend (Sponsored Brands, defensive brand campaigns) separately, across the lines that actually appear in those ads, not across the whole catalogue.

What a return really costs

This is where the invisible money goes. A return does not cost "the postage back". It costs this:

• The part of the referral fee Amazon does not always refund when it processes the reimbursement.
• The outbound fulfilment cost you have already paid and will not get back.
• The return leg and the processing of the unit.
• Unsellable stock: the unit that comes back opened, damaged or incomplete and has to be refurbished, sold as Warehouse Deals or destroyed. Here you lose the full cost of goods.
• Your team's time handling the case and replying to the customer.

As an industry reference point, return rates swing enormously by category: in apparel and footwear high double digits are normal, while in consumables and small items they usually stay in single digits. What almost nobody measures properly is the share of returned units that never sell again at full price. Ask your warehouse team for it. If that figure is above 40%, your return cost per unit sold is far higher than whatever you have written down.

A full worked example: a €34.90 product

The numbers below are an illustrative, invented example, not client data and not official fee rates. They exist to show the structure, not to be copied.

Line item	Amount	% of net
Price including VAT	€34.90	—
VAT (21%)	-€6.06	—
Net revenue	€28.84	100%
Category referral fee (15% of gross price)	-€5.24	18.2%
FBA fulfilment fee	-€3.60	12.5%
Allocated storage and surcharges	-€0.25	0.9%
Cost of goods (factory + freight + duty)	-€8.50	29.5%
Advertising allocated to the ASIN	-€3.10	10.8%
Return cost (6% return rate)	-€1.15	4.0%
Relabelling and prep	-€0.20	0.7%
Allocated coupons and promotions	-€0.70	2.4%
Contribution margin	€6.10	21.1%
Allocated overhead (seller fee, tools, management)	-€2.90	10.1%
Net margin	€3.20	11.1%

Note the detail that matters: cost of goods is 29.5% and the referral fee 18.2%, but the line that decides whether this SKU makes or loses money is advertising. If ad cost per unit rises from €3.10 to €6.10, which is entirely normal during a launch or a competitive spike, contribution margin hits zero and net margin goes red without anything else changing.

How the return cost was calculated

At a 6% return rate, 6 units come back for every 100 sold. On each return you lose the outbound fulfilment you already paid, you pay the return leg and the processing, and a share of units cannot be resold at full price. If half the returns end up unsellable, you also lose the cost of goods on those units. Spread across the 100 units sold, that works out at roughly €1.15 per unit. Run this with your real return rate and your real unsellable percentage.

Contribution margin versus net margin

They are not the same, and confusing them leads to bad decisions in both directions.

Contribution margin subtracts only variable costs: the ones that exist because you sold that unit. It is the figure you use to decide whether to keep a product, drop a price or raise a bid.

Net margin also subtracts overhead: seller fee, tools, headcount, external management, the financing cost of stock. It is the figure that tells you whether Amazon works as a business channel.

A product with positive contribution but negative net margin should not be killed automatically: it is contributing something towards fixed costs you would carry anyway. A product with negative contribution should be, because every sale makes you poorer and selling more makes it worse.

What to do with the products losing money

Before you delete anything, work through these levers in order:

1. Price. Raise it 5-8% and measure for two weeks. If conversion holds, you have fixed the problem without touching anything else. In many categories elasticity is lower than the fear suggests.
2. Advertising. Cut search terms with spend and no sales, and lower bids on placements that do not convert. This is usually the fattest line.
3. Fulfilment. Check the product sits in the right size tier. A box one centimetre too big can jump dimensional band and permanently inflate every unit. If it is bulky or slow-moving, look at moving it to FBM.
4. Returns. A high rate is nearly always a listing problem: photos that hide the real size, sizing badly explained, or a description that promises too much.
5. Cost of goods. Renegotiate on volume, consolidate orders, or review the packaging costing, which is where forgotten margin usually hides.
6. Delist. If after all of the above contribution margin is still negative, liquidate the stock and take it off the catalogue. Keeping a loss-making line for "brand presence" is a cost nobody signed off.

What to do this week

1. Build the minimum sheet for your twenty best-selling lines. Twenty only. Try the whole catalogue and you will never finish it.
2. Download the last 90 days of ad spend by campaign and allocate it by ASIN. Do not split it evenly.
3. Ask the warehouse for the share of returned units that did not sell again at full price last quarter, and put that number into the calculation.
4. Recalculate your real cost of goods including freight, duty and shrinkage. It is nearly always higher than the figure you have had saved for two years.
5. Sort the twenty lines by total contribution in euros and flag everything below zero. Start there on Monday.