How To Do Accurate Profit Calculations For Amazon Products

Navigate Accurate Profit Calculations for Amazon Products with Precision

Ever wondered how to supercharge your profit calculations and save big bucks on Amazon?

Well, you're in for a treat!

Today, we're diving into the fifth question out of the ten most commonly asked by Amazon FBA beginners.

I'm Vova Even, your go-to Amazon FBA seller with seven years in the game, and I'm here to spill the secrets with my special guest, Lucia Cracogna.

Lucia is the voice of the Amazon FBA newbies, and I've got the answers to her burning questions that actually every beginner grapples with.

If you want to get answers to all those questions, feel free to watch our entire conversation embedded right below. Enjoy! :)

Now, let's jump right into the article as we unravel the mysteries of profit calculations and money-saving techniques that can make a massive difference in your Amazon journey! 🚀

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Lucia: How do we go about accurately calculating profits?

I mean, how can we compile a comprehensive list of all the costs involved?

Vova: That's a great question, Lucia!

And it's crucial because getting this part right is everything.

Missing out on it might lead to a situation where you're not profitable, or, on the flip side, you could end up surprisingly over-profitable – although that's more of an exception.

Let's delve into how you can tackle this; it's quite intriguing.

So, there are different handy tools called calculators, like the Helium 10 Chrome extension or the Jungle Scout Chrome extension.

These tools offer a nifty feature that allows you to calculate your expected profits in a jiffy.

However, the one offered by Jungle Scout isn't free, so I'll refer to Helium 10's tool called the Profitability Calculator.

Read More: How To Use Helium 10 Profitability Calculator - Review And Tutorial

Here's the lowdown: you navigate to a product listing, let's say, kitchen scissors.

Pick a listing for a product similar to yours, and here's where the magic happens.

With the Profitability Calculator, you get a snapshot of crucial stats for that product – things like the price, weight, and all the Amazon fees in one neat display.

It's like a dashboard for your potential profit.

Pretty cool, right?

Now, here's the cool part – I've got tutorial on using the Helium 10 Chrome extension right on my channel.

Blog Version of This Video: Helium 10 Chrome Extension - Detailed Review & Tutorial

In this step-by-step guide, I walk you through the process.

This is where it gets interesting.

You'll get to see exactly how much Amazon takes from a product similar to what you plan to sell.

It's all about understanding the lay of the land, especially when it comes to factors like weight and fees, as you'll likely be dealing with similar products.

So, picture this: you're sizing up your competition.

You plug in the numbers you've gathered, considering the supplier's cost for the product plus shipping, into that trusty profitability calculator.

Now, here's a clever move, especially if you're waiting on shipping quotes.

Even before you have the exact shipping cost, you can still make headway.

Input the product price, which you might snag from a platform like Alibaba or wherever you're sourcing.

And here's the trick: if you're still waiting on the precise shipping cost (which you should ideally get from a freight forwarder), no worries.

Read More: 3 Best Freight Forwarders For Amazon FBA (I Worked With All Of Them)

Here's what you can do – estimate the shipping cost by entering how much you expect to pay per kilogram of weight or for other units of measurement for shipping.

Let's say, for instance, four kilograms, just to illustrate.

It's a workaround that keeps you moving forward, even if you're still dotting the i's and crossing the t's on shipping details.

Now, let's break down this estimating game a bit more.

Consider a hypothetical scenario – the cost per kilogram for shipping, let's say it's around two dollars.

This figure, of course, varies depending on the product, the shipping route, and a few other variables.

It's a ballpark figure for the sake of illustration.

What happens next is the calculator works its magic.

It takes into account the weight of the product, adds that extra cost per kilogram to the overall calculation (or let's just call it a quotation for simplicity's sake – hope that term works!), and voila!

You get a quick snapshot of your potential profit.

Plus, there are other goodies in there – your margin, return on investment, and more.

And honestly, it's pretty straightforward once you get the hang of it.

Now, let's talk about what you'd ideally want to witness in this scenario.

I tossed around an example earlier with an 800% return on investment – quite impressive.

But here's the thing, even if your numbers aren't that jaw-dropping, no worries.

Picture this: You've identified a product, let's say kitchen scissors, costing you a dollar.

With shipping, it's around one and a half dollars, maybe even just one dollar again.

Now, you peek at the competition, and they're selling it for ten dollars.

Here's where it gets interesting.

You plug your price and shipping cost into a handy calculator that mimics the competition.

And voila, it reveals your potential return on investment and margin.

It's like a crystal ball for your profitability.

Oh, and here's a valuable takeaway: This process is an excellent opportunity to deepen your understanding of the market dynamics.

Now, let's explore a smart move to cut down on costs.

Ever wondered how you can potentially reduce both the weight and size of your products?

Well, the trick lies in tweaking these elements to lower your fees.

Here's the scoop: If you find yourself in a specific category on Amazon, there's room to maneuver.

You can potentially shift to a lower category, and sometimes, you might be right on the borderline.

Consider this: Imagine you're transitioning from a category that charges five dollars per sale to one that only takes 3.5.

The difference is significant.

Let's say, for instance, in the five-dollar category, the weight threshold is anything over one kilogram.

But, if you dip below one kilogram, you can shift to the lower fee category.

So, here's the game plan for your niche: Craft a product that's, let's say, 930 grams.

By shifting to a lower tier, you automatically unlock savings – an extra 1.5 dollars per sale, to be precise.

The magic here is maintaining the same product but strategically tweaking certain elements without compromising its performance.

For instance, you might consider trimming down the quality of the steel, if applicable, or rethinking the packaging – all with the aim of bringing the weight and size down.

Oh, and here's another nugget of wisdom: Take a look at volume weight.

Sometimes, both Amazon and shipping services factor in the volumetric weight, especially when shipping products.

It's not just about the actual weight; they might consider the space your product occupies during shipping.

So, keeping an eye on both fronts can be a game-changer.

Let me illustrate this with an example.

Imagine you're in the business of selling feathers – they practically weigh nothing, like 0.0 kilograms.

But there's a twist. 🤔

You decide to pack these delicate feathers in a gorgeous gift box, and let's say you fill up a container with these feather-filled boxes.

Sure, the weight of the container won't skyrocket, but the reality is someone has to ship that container, right?

Here's where volumetric weight comes into play.

It's not solely about the actual weight of the items; shipping services, and even Amazon, consider the space your product takes up during shipping.

It's a game of balancing the physical weight and the space it occupies.

And, by the way, for the details on how FBA fees are calculated, click on the button below.

Regular VS Dimensional Weight Calculation

Lucia: Yeah, absolutely.

It's reassuring to realize that you can significantly cut down on Amazon fees by simply paying attention to the weight and…

Vova: Dimensions of the product, right?

Lucia: Exactly, the volume of the final product.

That insight holds a lot of value.

Vova: It's crucial to integrate these considerations into your product creation strategy.

Think about it: How can you streamline the packaging to make it more compact, thus saving on shipping and logistics costs?

If you can find ways to pack it more efficiently without compromising performance, you're in for significant savings.

This opens up opportunities to possibly lower your prices, making your product more competitive and boosting sales while still maintaining profitability.

It's all about doing that extra research and optimizing where you can.

Lucia: That's valuable insight.

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Conclusion

Today's chat with Lucia shed light on a game-changing aspect of Amazon selling – cutting down on fees by smartly managing product weight and dimensions.

By optimizing packaging and understanding the nuances of volumetric weight, we've uncovered strategies to boost profitability.

Remember, it's not just about what you sell, but how you package it.

So, dive into these insights, get creative with your product design, and watch your Amazon journey become even more rewarding.

Happy selling, everyone!