Selling on Amazon can feel exciting. The sales come in, you see units shipped, and revenue starts to build. But then comes the big question: How can you tell if your Amazon business is actually profitable? For many Amazon sellers, what looks like healthy income on the surface doesn't always translate into a profitable business once costs, fees, and taxes are taken into account.
In this guide, we'll break down how to measure profitability as an Amazon seller, the hidden costs to watch out for, and the tools that can help you keep track.
Understanding your profit margin as an Amazon seller
Your profit margin tells you how much money you keep after covering all your costs. It's the clearest measure of whether your Amazon store is actually making money.
To calculate your profit margin:
- Work out your total revenue. This is the amount of money you make from all sales. Deduct the Cost of Goods Sold (COGS). This means how much you paid to make and supply your products (including supplier costs, materials, and any shipping costs to get the stock to Amazon warehouses).
- Subtract Amazon fees and operating expenses. This includes Amazon FBA fees, referral fees, advertising costs, storage fees, and other selling expenses.
- Divide your profit by revenue and multiply by 100 to find your profit margin percentage.
For example, if you sell £10,000 worth of products in a month, but £7,500 goes on stock, shipping, and Amazon fees, your profit is £2,500. That means your profit margin is 25%.
If numbers aren't your thing, you can use Amazon's revenue calculator to estimate your profit margin before adding a new product or contact Unicorn Accountants for our expert support.
How do Amazon FBA fees impact my profit margin?
Fulfilment by Amazon (FBA) makes selling much easier for new sellers as well as experienced Amazon businesses, but it's not free. A vast majority of sellers use FBA because it gives them back their time and helps boost sales thanks to tools like Amazon's fulfilment network, Prime Badge, and Buy Box.
But, beware, as FBA fees can eat into your margins if you don't track them carefully.
Amazon takes a percentage for referral fees, adds fulfilment fees for picking, packing, and shipping, and charges storage fees for holding your products in its warehouses. And if stock doesn't sell quickly, long-term storage fees can add up fast.
For some sellers, these costs mean that although sales look impressive, the business isn't as profitable as it seems. We always recommend factoring in FBA fees when you start selling on Amazon with FBA.
Signs your business is not as profitable as you think
Many sellers get too caught up on top-line sales and miss the warning signs that their profitability is slipping. But remember, profitability isn't about what you sell, it's about what you keep.
Keeping a close eye on these warning signs will help you stay on track:
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High sales, low bank balance. This means that if your income isn't translating into cash, your operating expenses may be too high.
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Relying too much on paid ads. If you're spending as much money on advertising as you're making from organic sales, your margin will shrink fast.
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Stock sitting in warehouses. You need to be selling your stock (and that means across all categories). Long-term storage fees can silently drain your profit.
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Constantly chasing the Buy Box with lower prices. Yes, you can get access to some handy tools when sales are good, but if your margins are too thin, a price drop can turn profits into losses.
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Difficulty paying suppliers or covering expenses. This is a clear sign your business model isn't sustainable and you'll need to address it ASAP.
Key tools to measure your Amazon business's profitability
As a small business owner, you probably already know that having the right tools in place is vital. But do you have the tools you need? And how do you know which tools are best for you? Every successful seller could benefit from software that helps them understand their numbers.
We've briefly covered the Amazon revenue calculator already. It's a handy, free tool that gives FBA sellers support in estimating profits before they buy more inventory.
Here are some of the other key tools that are a must-have for sellers:
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Xero accounting software with A2X integration – use these two tools in combination to automatically import your Amazon seller account data and get rid of the stress of manual data entry and producing accurate financial reports.
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Cash flow forecasting tools – again, Xero is a great one for this. It helps you plan ahead and ensure you can cover supplier payments and operating expenses.
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Inventory management tools – have a digital system in place to help you monitor stock levels, reduce long-term storage fees, and prevent over-ordering. Tools like Xero, Zoho, and QuickBooks can help you do this or Veeqo, which is free.
Common costs Amazon sellers overlook
It's easy to focus on sales and revenue while forgetting the hidden costs that quietly eat away at your margins. Many Amazon sellers only realise their profits aren't as healthy as they thought once these charges start piling up.
To help you stay one step ahead, we've highlighted some of the most common costs you don't want to overlook and how they can affect your bottom line.
Cost
What it means
Why it matters
Example impact
Long-term storage fees
Charged when inventory sits in Amazon warehouses for over 12 months
Eats into profits if stock doesn't sell quickly
£500 extra fees on 1,000 unsold units
Returns & refunds
Costs related to restocking, damaged products, or giving refunds
Reduces net profit and holds up cash flow
A 10% return rate could wipe out margins on bestsellers
Advertising costs (PPC)
Pay-per-click campaigns to increase sales
High spend without sales means wasted budget
Spending £1,000 per month on ads with £600 in sales means a £400 loss
Payment processing fees
Fees Amazon deducts from every transaction
Impacts cash flow and reduces take-home profit
2–3% fee per transaction adds up quickly
Stock removal fees
Charged when you ask Amazon to return or dispose of unsold items
Adds extra cost if products aren't moving
£0.50 per unit × 500
Start profiting today with Unicorn Accountants
At Unicorn Accountants, we specialise in helping Amazon sellers like you understand your numbers, cut unnecessary costs, and build a profitable business. Whether you're just starting out on Amazon or already exploring other platforms, our friendly team will help you take control of your finances.
If you want expert support managing finances for your Amazon store so you can focus on growing it, contact Unicorn Accountants on 020 8064 0454 for a friendly, no-obligation chat. Or complete our contact form and tell us more about your business.
Read more: Which metrics to track for a successful Amazon business.
Frequently asked questions about Amazon seller profits
What is a good profit margin for Amazon sellers?
We find that most sellers aim for a profit margin of at least 15–20%. However, what counts as "good" depends on your business model and long-term goals.
How often should I review my profitability?
You should always keep a close eye on your profits, so the more often you can review your margins, the better. We recommend reviewing your profitability at least monthly. Amazon fees, advertising costs, and stock levels can change quickly, so monthly management accounts will help you stay proactive instead of reactive.
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