How to sell 50 units in one day on Amazon and make losses
Editor’s note: This is a guest blog by Michael Muhin, co-founder of sellerboard.com
Paradoxical as it may seem, this is a real example when in a single day 50 product units were sold, but profit was kept negative. The reason is Amazon Storage fees.
They are withdrawn once a month and most sellers neglect them when calculating their profit. Storage fees are a good example of difficult to calculate Amazon fees, let’s examine them closely.
Sellers who work with the FBA (Fulfillment by Amazon) program must pay storage fees for products stored in Amazon’s warehouses.
The current prices for US-based warehouses vary by time of the year and product size, standard or oversize products, and starting April 1, 2018 rates have increased by $0.05:
January-September: $0.64 per cubic foot standard size and $0.43 for oversize products
October-December: $2.35 per cubic foot standard size and $1.15 for oversize products
Additionally, there are huge long-term storage fees that are applied to items stored for longer than 6 or 12 months as of the Inventory Cleanup date priced at $11.25 and $22.50 per cubic foot respectively. Starting September 15, 2018 these fees will be changed from being charged on a semi-annual basis to a monthly basis.
The fees are calculated based on the combined volume of the products and seller’s stock in the Amazon FBA warehouse.
This volume, however, changes dynamically since products are shipped out every day. This makes calculating the exact storage fees quite hard.
There are services that give users the actual real-time information. For example, sellerboard (formerly known as amzcontrol) takes numbers which were charged by Amazon, rather than calculating them based on the volume of the products stored. They are automatically included in profit calculation, along with the number of other types of fees charged by Amazon.
Besides Storage fees, Amazon sellers have a difficult time calculating returns correctly, so usually, they are just being ignored. There are two main reasons for that: «they don’t really matter» or «it’s not clear how to count them».
The bad news is that returns do matter. The good news: sellerboard (formerly known as amzcontrol) takes all returns into account automatically, let’s see how in our example below:
It’s important to know that returns contain not only processing costs and non-refundable costs but also adjustment of sales and costs.
Let’s say you sold 1 unit in January. If the client returns it in February you should make changes: give back money to the buyer, adjust Amazon fees and more.
So how do you calculate returns correctly? Let’s describe all of the components:
- Product (-1207.99): money refunded to customers for purchases
- Refund commission (-31.60): Amazon fee for returns handling
- Commission (+157.98): Amazon returned the referral fee, that they withheld upon sale
- Shipping/Shipping chargeback (+28.29/-33.68): refund for shipping to the customer and shipping chargeback refund to the seller.
- Product cost (+316.17): if the returned product is “sellable”, sellerboard will calculate the COGS with a plus sign. When the product is sold, COGS for the unit is calculated with a minus. If the unit is returned broken, it’s cost will not be calculated with a plus.
In summary, it’s much easier to use special software that visualizes all of your data, takes all amazon fees into account automatically, supports changing buying prices as well as monthly or fixed costs (e.g. virtual assistant, or photo shoot).
- Michael is an Amazon seller and a co-founder of sellerboard.com (formerly known as amzcontrol.com) – a German startup, which is building the world’s best profitability analytics service for sellers on Amazon, that now has more than 2000 registered users and a lot of positive feedback coming in every day.