How to Calculate Amazon Profit Accurately? [For OA Sellers]

March 4, 2024
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Online arbitrage is all about making profits, and there are many factors affecting the amount of that profit. It seems simple: you buy discounted products, sell them for a higher price on Amazon, and that's it! But there are also costs: shipping costs you money, FBA costs you money, there are also account subscriptions, returns, etc.
All of these can increase or decrease your profits over time. This article will show you how to Calculate Amazon Profit most accurately.

Understanding Amazon’s Fee Structure for Arbitrage Sellers

Working on Amazon as an online arbitrage seller is not completely free. There are some costs you need to consider, starting right at sign-up. If you plan to become a professional seller and turn this into a business for yourself, you need to get the professional subscription plan, which costs $39.99. There are some other fees, including Amazon FBA seller fees, including

Referral Fees

This is an amount that Amazon charges you every time you sell a product. It includes a percentage of the total sales price (between 8% – 15%). It varies based on category.

Fulfillment Fees (FBA)

If you join the FBA (Fulfillment By Amazon) plan, you need to pay around $0.99 for each sales transaction as the subscription fee. In this plan, Amazon will take over shipping, packaging, returns, etc for you.

How to Use Reports to Calculate Your Amazon Fees?

There is a report named “fee preview report” accessible in Seller Central. This report includes a spreadsheet of all ASINs, product names, categories, and, most importantly, the cost of all the fees paid by you.

Use the report to get data on how much it costs you to deliver the product to your customer, and then compare it to your gained cash to see how much you’ve made a profit. You can access the CSV version of the fee preview report here:

Seller Central – Reports tab -fulfillment- Payments- fee preview

Additional Costs for Arbitrage Sellers

Now that you have read the basic Amazon fees, it is time to find out about the additional ones. Your product doesn’t just magically appear at the buyer’s doorstep; it takes some effort and, of course, some cash.

Shipping and Handling

Shipping costs vary depending on the item and your business policies. If you join FBA (and pay the fee), you probably won’t have to pay any additional price for shipping and handling your products. If you are on the Individual Selling Plan, your business will pay set prices for shipping your products: from $3.99 to $14.95 for domestic orders and $16.95 to $46.50 for international ones. In the professional plan, your company will set the shipping prices.

Prep Center

Prep centers are huge warehouses that take the product from you, label, package, and ship it to the buyer’s address. Based on their services and the volume of products, they may charge different prices, starting from $1 or $2 per item. Find prep centers for online arbitrage and start selling your products.

Repackaging and Labeling Costs (for FBM only)

If you are an FBM seller, the “Buy shipping” feature allows you to buy shipping labels from Amazon. These labels cost around 10 to 50 dollars. As for the packaging and repackaging, there are no strict requirements. However, sellers must take good care of their product so it reaches the customer without damage.

Hidden Costs in Online Arbitrage

No matter the business, you will always face some hidden costs as a business owner. That’s also the case with online arbitrage, which will become more costly over time. Here are some things you may need to pay money for along the way:

Sourcing Platforms’ Fees

Sourcing can be a lot, especially for new sellers. Some people decide to outsource this job to softwares or websites, and these platforms usually require a subscription fee.

Storage Fees

Storage fee for Amazon FBA is now $3.63 per cubic foot, and long-term storage fees are $1.50 – $6.90 per cubic foot.

Removal and Disposal Fees

Like many other Amazon fees, this one is determined based on the unit size and weight. In early 2023, removal and disposal fees were set at $1.06 for standard-size products and $1.62 to $4.38 for larger ones.

Returns Processing Fees

This fee varies based on your zip code and seller policies. Fifty of US states can be eligible for free returns, but you should learn more about the product and set your policy.

Profit Calculators for Online Arbitrage Sellers

Calculators are online tools that take your data and give you an estimation of how much you will potentially profit. To use one, you need to gather sales data and statistics first. OABeans Amazon FBA Calculator is easy to use and very accurate. Just go to the tool page, fill in the sales price, months storage, extra costs, and other needed data, and then click on calculate. This free tool can be handy for both newbies and professional sellers.

Benefits of Using Profit Calculators

First and foremost, you won’t need to do it manually. The calculator calculates the amount of your profits automatically and accurately. Moreover, it gives you valuable data that you can use for future decision-making and growing your business. It also takes less time and is more efficient.

Recommended Calculators for Arbitrage Sellers

Here are some useful calculators we recommend for your online arbitrage business:

OABeans
Arbitrage calculator
Jungle Scout extension
RevSeller
Amazon FBA Revenue Calculator

Real-world Arbitrage Profit Calculation

To get informed and have a thorough knowledge about your profits, sometimes you need to get your hands dirty and calculate the profits yourself. There are ways and formulas to do this manually. This is one of the most used formulas that work in almost every OA business:

The amount of profit for each sale = Revenue of product – (all costs including shipping, packaging, etc).

Remember that this formula gives you the profit of a single sale, not percentage, not general data, and not statistics. To get these numbers, you either need to use a calculator or work with detailed big data.

Tips to Enhance Profit Margins in Online Arbitrage

To increase your profits, you have two ways:

Have more revenue
Decrease your costs.

To have more revenue, not only do you need to “sell more”, but you should sell intelligently and have a data-driven business, learn from experiences, and make your OA journey efficient. Use data sites and tools, market your products, try to improve customer service, and…

One of the things that can strongly grow your profit margin is using sourcing list services. Want to know how?

Read “How to maximize profits with sourcing lists”.

The Formula For Calculating Amazon Profit

Final Thoughts

No matter how you do it, it’s important just to do it, gather data, and calculate the amount of your profits. Profit calculation works like a magic mirror that shows you the state of your business, and it is brutally honest. This data helps you cut some costs, search for revenue growth, and make important decisions regarding your business.