What is Gross Profit and what is Gross Margin?
Gross Profit shows you the dollar amount you made in profits after deducting some of the costs of doing business on Amazon.
Gross Margin tells you the percentage of sales that become gross profit.
How are they calculated?
Gross Profit = Total Sales - (COGS + Amazon Selling Fees + FBA Fees + Ad Spend)
Gross Margin = (Gross Profit ➗ Total Sales) * 100
Why does your margin matter?
Your margin indicates whether or not a particular product is profitable after the investments you have made: from purchasing inventory to advertising.
How do you analyze margin?
Navigate to the Products Metrics page. Look at the est. gross margin for each SKU. Try out the following:
Filter or sort SKUs based on negative or low margins
Are these SKUs new products in the launch phase? If not, then you should see where you can scale back spending. Some options include:
- trying to negotiate lower prices with your suppliers and reducing COGS
- cutting back on ad spend
- testing a higher selling price
Search for a product line or filter by Parent ASIN
Compare margins for similar products--especially ones that are on the same listing. Is one product your loss leader? i.e. it has low margins but is driving sales for other, higher-priced variations.
Analyze your best seller
Is your best-selling product also your most profitable? If you have a high gross margin, consider spending more on advertising to improve sales volume. If the margins on your best seller are slim, it might be time to scale back on ad spend.