Paradoxical as it may seem, this is a real example when in 1 day 50 product units were sold, but profit is kept negative. The reason is the Amazon Storage fees.
They are withdrawn once a month and most sellers neglect them when calculating their profit. Storage fees is a good example of difficult to calculate Amazon fees, let’s examine them closely.
Sellers who work in the FBA (Fulfillment by Amazon) program must pay storage fees for products stored in Amazon’s warehouses.
The current prices for US-based warehouses vary by time of the year and product size (standard or oversize products):
January-September: $0.69 per cubic foot standard size and $0.48 for oversize products.
October-December: $2.40 per cubic foot standard size and $1.20 for oversize products.
Additionally, there are huge long-term storage fees that are applied to items stored longer than 6 or 12 months as of the Inventory Cleanup date ($11.25 and $22.50 per cubic foot respectively). September 15, 2018 this fees were changed from a semi-annual basis to a monthly basis.
The fees are calculated based on the combined volume of the products and sellers stocks in an Amazon FBA warehouse.
This volume, however, changes dynamically since products are shipped out every day. This makes calculating exact storage fees quite hard.
There are services that give users the actual real-time information. For example, sellerboard (formerly known as amzcontrol) takes numbers which were charged by Amazon, rather than calculating them based on the volume of the products stored.
They are automatically included in profit calculation, along with the number of other types of fees charged by Amazon.
Besides Storage fees, Amazon sellers have a difficult time calculating returns correctly, so usually they are just being ignored. There are two main reasons for that: «they don’t really matter» or «it’s not clear how to count them».
The bad news is that returns do matter. The good news: sellerboard takes all returns into account automatically, let’s see how in our example below:
It’s important to know that returns contain not only processing costs and non-refundable costs but also adjustment of sales and costs.
Let’s say you sold 1 unit in January. If client returns it in February you should do changes: give back money to buyer, adjust Amazon fees and more.
So how do you calculate returns correctly? Let’s describe all of the components:
- Product (-1207.99): money refunded to customers for the purchases
- Refund commission (-31.60): Amazon fee for returns handling
- Commission (+157.98): Amazon returned us the refer fee, that they withheld upon sale
- Shipping / Shipping chargeback (+28.29/-33.68): refund for the shipping to the customer and to shipping chargeback refund to the seller.
- Product cost (+316.17): if the returned product is “sellable”, sellerboard will calculate the COGS with a plus sign. When the product was sold, COGS for the unit was calculated with a minus.
If the unit is returned broken, it’s cost will not be calculated with a plus.
In summary, it’s much easier to use special software that visualizes all of your data, takes all amazon fees into account automatically, supports changing buying prices as well as monthly or fixed costs (e.g. virtual assistant, or photo shoot).