Amazon selling profit margin

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4 Jan 22 09:11:15 pm
Are you an amazon million dollars seller and what it really looks like broken down,in details.. food for thought let me know what you think in comments.

Amazon Selling Company Profit Margins - An Overview

For a company selling on Amazon, here is where money realistically goes for every $1,000,000 in SALES or REVENUE:

$1,000,000 in sales
$440,000 (44%) in Fees to Amazon(commission, shipping and storage)
$150,000 (15%) in Advertising Costs to Amazon
$220,000 (22%) in Product Cost (Cost of Goods plus transport of these goods)
$70,000 (7%) in Payroll, Rent, Financial Fees (Loans), Software, this is called "Operational Expenses"
$35,000 (3.5%) in refunds
$10,000 (1%) in promotions (Coupons, deals)

This leaves approximately 7.5% or $75,000 in "Profit" or "Income".

However if your sales are INCREASING, then you need to buy more product, thus from that $75,000 you need to buy an additional $45,000 of inventory because you need to have 20% more inventory to not run out of stock. This $45,000 is NOT counted as an expense because the US Government does not allow you to take an expense of a product until it is sold.

So, you are taxed 40% on the $75,000 of "Profit" but your bank account as the owner only had $30,000, which is exactly the same as your tax bill: $30,000! That leaves exactly $0 left over. The government was paid before you, Amazon was paid before you, the staff was paid before you, etc.

This is the not-sexy part about selling people don't always talk about.

But the good part is that you CAN control the margin, and can figure out a smart way to lower the ads from 15% to 12%, and that is money you can then see. You can figure out how to improve the refunds and you can keep that money, get better supplier pricing, figure out how to sell on another marketplace now that you have a brand presense, etc. a million other ways.

As an owner, you are building an asset long term and will always win if things go well long-term. But while the company is growing, the above is a real scenario close to reality. You pay the the price today to build something much more valuable in the future.

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