An Amazon FBA seller breaks down why 50% net profit margins are nearly impossible at scale. On a $100 item, costs eat 55% before ads: 15% COGS, 15% Amazon fees, 15% fulfillment. Add realistic 20% advertising spend and storage fees, and you're left with roughly 35% net margin, not 50%.
So there is this other Amazon FBA creator where we go back and forth beefing it when it comes to profit margin on an Amazon FBA product, private label product. And I say that it is nearly impossible in order for you to have a 50% profit margin on your product unless— so I'll go ahead and put a caveat to that— unless you're making 1 to 2 sales every single day where you're not relying on going ahead and scaling it, or it is one child ASIN where a different child ASIN is funneling all the ad spend to it. Okay. And the reason why I say that is nearly impossible. Again, if you're selling a $100 item, if you're the best sourcer in this world and have the best freight costs, if you're selling a $100 item, 15% of that is going to go to cost of goods sold. And getting it shipped into Amazon. 15% is the Amazon referral fee. And 15% is going to be the pick and pack fee in getting it shipped to a customer. So right there, 45%, if you are the top notch, best of the best when it comes to sourcing your actual products, is going to go ahead and be to expenses, right? So that leaves you with a 55% net profit margin. Before ads. And if you're scaling your ads, you're going to be right around a 20% TACOS. So if you're scaling your actual brand, you're going to be at a 20% TACOS, right? So right there off the bat, if you are the best of the best— and again, give or take with TACOS— you are there at a 35% net profit margin. And I haven't even talked about storage fees. I haven't talked about coupons, deals, liquidations, removal fees, all the different types of expenses that come with Amazon FBA private label. So yes, it is nearly impossible for you to have a 50% net profit margin after all expenses.
