If you’re selling on Amazon through FBA (Fulfillment by Amazon), understanding your Profit and Loss (P&L) statement is key to running a profitable business. But how do you know if your numbers are right? Are you losing money without even knowing it?
I recently struggled with an unprofitable Amazon account and couldn’t figure out what was wrong. That’s when a friend, who has been selling on Amazon for years, showed me what an Amazon FBA P&L should really look like. I used this new knowledge to turn my business around.
If you’re not making the profits you want, comparing your P&L to the right numbers can help you figure out where you’re going wrong. Here’s how you can use your P&L to identify problems and fix them.
Net Revenue – The Starting Point
Net Revenue is the total amount of money you earn from sales before any expenses or fees are subtracted. Think of it as the total amount in your bank account from selling products. This is your starting point.
Net Revenue = 100%
But to understand how much you’re actually making, you need to subtract your costs. Let’s break it down.
Key Costs You Should Watch
Here’s what a typical Amazon FBA P&L looks like, based on industry averages. This can help you spot where you might be losing money.
1. Promotions: ~1%
Promotions like discounts or coupon codes can help boost sales, but they also cost you money. On average, promotions take up about 1% of your sales. If you’re running a lot of promotions, this percentage could be higher, so keep an eye on how much you’re discounting.
2. Cost of Goods Sold (COGS): ~26%
Your COGS is how much it costs to buy or make the products you sell. This includes the cost of production, packaging, and shipping. The average COGS for Amazon sellers is 26% of revenue. If your COGS is higher than this, it might be time to find cheaper suppliers or ways to reduce your production costs.
3. Referral Fee: ~15%
Amazon charges a Referral Fee for every sale you make, which is a percentage of the sale price. This fee varies by product category but is usually around 15%. You can’t avoid this fee, but knowing how much Amazon is taking will help you price your products right.
4. FBA Pick & Pack: ~27% (Mine Was 41%, Yikes!)
This is the fee Amazon charges to pick your product from the warehouse, pack it, and ship it to the customer. On average, the FBA Pick & Pack fee is 27% of your revenue. In my case, I was paying 41%, which was way too high. To fix this, I looked at the size and weight of my products, and by making changes, I was able to lower this fee.
5. Amazon Storage: ~2%
Amazon charges a fee for storing your products in its warehouses. This is usually a small percentage, around 2% of your sales. However, if you have slow-moving inventory, this can add up quickly. Keep track of your stock levels and remove unsold items if they aren’t moving.
6. Inbound Placement Fees: ~0%
This is a small fee Amazon may charge when you send products to their fulfillment centers. It usually costs you 0%, but it’s important to keep track of any charges related to shipping inventory to Amazon.
7. PPC: ~10%
If you’re running ads to promote your products, that’s your PPC (Pay-Per-Click) cost. On average, sellers spend about 10% of their revenue on PPC. If your PPC costs are higher, it might mean you need to adjust your ad campaigns, target better keywords, or reduce your ad spend to make your campaigns more profitable.
What’s Left After All the Fees?
After subtracting all the costs from your Net Revenue, what’s left is your Post-Amazon Fee Margin. This is the money you have after paying Amazon’s fees, which you can use to pay yourself, reinvest in your business, or save.
On average, this margin is around 19%. If your margin is lower than this, it means you’re losing money somewhere, and you need to adjust.
My P&L Breakdown:
Here’s what my P&L looked like after using these averages to check my numbers:
- Net Revenue: 100%
- Promotions: ~1%
- COGS: ~26%
- Referral Fee: ~15%
- FBA Pick & Pack: ~27% (I was paying 41%—yikes!)
- Amazon Storage: ~2%
- Inbound Placement Fees: ~0%
- PPC: ~10%
Post-Amazon Fee Margin: 19%
If your numbers are far off from these averages, it’s time to look closely at where your money is going. The good news is that you can take action to fix it.
How to Stop the Money Leak
- Check Your FBA Fees: If you’re paying more than 27% in FBA fees, check the size and weight of your products. Consider reducing the size or shipping smaller quantities to save on fees.
- Lower Your COGS: If your COGS is higher than 26%, try negotiating with your suppliers for a better price or look for cheaper alternatives.
- Refine Your PPC Campaigns: If you’re spending more than 10% of your sales on ads, consider optimizing your campaigns. Target the right keywords, reduce unnecessary spending, and aim for a better return on your ad spend.
- Reduce Promotions: If you’re discounting too much, it can hurt your profits. Make sure your promotions are really driving sales and not just eating away at your margins.
Did This Help?
If this post helped you understand your Amazon FBA P&L and gave you some ideas to improve your business, feel free to share it with other sellers. The more you understand your numbers, the more control you have over your profits.
Let’s work smarter and grow our businesses—one profitable step at a time! 📈💰
