Generating revenue is not difficult on Amazon, however making a profit can be.

Most sellers are making sales but aren’t making any money because they don’t take into account how all the fees can affect the net profit margin. I don’t blame them, it’s actually quite difficult to calculate and many sellers are struggling to get the right figures.

Amazon is slowly catching up and trying to build the analysis tools for the basic calculations, however its just not there yet. Some sellers don’t feel comfortable with Amazon knowing their cost of goods as they are known to overtake listings for wholesale sellers or release their own private label version and dominate the category.

To help out, I’ve created a very simple and fee tool that you can use for when you are planning to launch a product or checking profitability on your current ones.

Fees to Consider

VAT

This is a very important thing to take into account as the Amazon Fee Calculator will show the “Selling on Amazon fees” and “Fulfilment Cost” as excluding VAT. If you not registered for VAT, add 20% on top of these figures. The tool below will do this automatically if you use the “NOT VAT REGISTERED” tab.

TIP FOR ALL NEW SELLERS: You are likely to reach the VAT threshold of £85,000 (2019 threshold) in the first or second year of trading. Bear in mind that once you do, you will need to “collect” VAT and pay it to the HMRC quarterly. So if you sell a product for £9.99, once your are registered for VAT The HMRC will want £1.67 VAT from each sale., until you register, that £1.67 is yours to keep as profit.

Registered for VAT
If you are registered for VAT, you don’t pay 20% VAT on Amazon fee’s such as commission or FBA fee. But you do need to collect 20% VAT from your final selling price.

Not Registered for VAT
If you are not registered for VAT, you will pay 20% on all Amazon fee’s and this is important as the Amazon Fee Calculator shows fees without VAT. Use the NOT VAT REGISTERED tab on the tool, it will automatically add the 20% VAT on Amazon fees.

Amazon Fees

Commission fee – Usually around 8-15% from final selling price and will depend on the product category.

FBA Fee – Will depend on the size and dimensions of the product.

Remember if you are not registered for VAT, these fees will have an additional 20% VAT charge.

Product Cost

While this seems simple, if you are sourcing products from outside the UK make sure you consider all costs involved.

Product cost – The cost per unit. (Will vary each order due to currency exchange rate)

Shipping cost – From supplier, to Amazon or to customer

Import fees – Duties and VAT if importing from outside of the EU, usually around 20% from total order sum.

Transaction fees – Bank transfer fees for abroad payments

Advertising

PPC – Pay Per Click advertising cost on Amazon. You can deduct the total advertising cost from total weekly or monthly profit for each product to determine if the product is profitable.

How to use the tool

This simple tool has 2 tabs for VAT registered and non VAT sellers. Only change the data under the green headings.

Would love to hear what you thought!

If you have any questions on how to use this tool, let me know in the comments below.