A lot of Amazon sellers are running stores that look profitable on the dashboard and aren't profitable in the bank account. The revenue number is real. The margin per unit — after fees, cost of goods, and advertising — is where the business actually lives.
Here's how to model it before you place the next inventory order.
The Unit Economics Stack
Every Amazon product has the same basic stack of costs that eat into your margin. Work through them in order.
1. Start with Your Sale Price (Net of Promotions)
This is what you actually collect, not your list price. If you run regular coupons, lightning deals, or promotional discounts, your effective net price is lower than it appears. Use a 30-day average of what you actually collected per unit, not the list price.
2. Amazon Fees
Amazon takes two sets of fees on every sale:
Referral fee: A percentage of the sale price that varies by category. Most categories are 8–15%, but some are higher (jewelry, watches) or lower (electronics). For most sellers, plan on 15% as a conservative estimate if you don't know your specific category rate.
FBA fees (if using Fulfillment by Amazon): A per-unit fee that depends on the size and weight of your product. Standard size under 1 lb typically runs $3–$4 per unit. Larger or heavier products escalate significantly.
Storage fees: Monthly inventory storage charges that become significant if products sit for more than 30–60 days. Add the monthly storage cost divided by your monthly unit sales to get a per-unit storage cost.
Combined, Amazon fees typically consume 25–40% of your selling price on a well-optimized FBA listing.
3. Cost of Goods (COGS)
Your purchase price plus inbound shipping to FBA. Don't forget:
- Import duties and customs fees if sourcing internationally
- Prep and packaging costs if you're using a third-party prep center
- Inspection costs if you inspect at origin before shipping
The total landed cost is your real COGS, not just the purchase price per unit.
4. Advertising Cost of Sale (ACoS)
This is the percentage of your ad-driven revenue that goes back to Amazon for sponsored placements. A well-managed catalog might have a blended ACoS of 15–25%. Newer products with poor organic rank may run 40–60% or more until reviews and rank build.
The key metric most sellers miss: your total ACoS, not just your sponsored product ACoS. If you're running Sponsored Brands and Display ads in addition to Sponsored Products, blended your all-in ad spend against your total revenue to get your real ad drag.
5. Calculate Your Real Margin
Take your net selling price, subtract referral fees, FBA fees, storage, COGS, and ad spend. What's left is your gross profit per unit.
For most categories, a sustainable healthy margin is 15–25% gross after Amazon fees and ad spend. Below 10% gross margin, you're one fee change or cost increase away from negative.
The Break-Even ROAS Ceiling
Before scaling ad spend, calculate the maximum you can afford to pay per dollar of revenue.
If your gross margin (before ads) is 30%, you can afford to spend up to 30 cents of ad spend per dollar of revenue and stay at break-even. That's a break-even ROAS of 3.3x.
If your current campaigns are at 3.5x ROAS and your margin floor is 3.3x, you have almost no room to scale before you go upside down on ads. If your campaigns are at 8x ROAS, you have significant room to add budget and still stay profitable.
This ceiling — your break-even ROAS — is the most useful number in your advertising model. Scale below it and you scale losses. Scale above it and you're growing profitably.
The Reorder Timing Problem
The other major profitability leak for FBA sellers is inventory timing: ordering too late (running out of stock, losing rank, losing revenue), ordering too early (paying excess storage fees, tying up working capital).
The right reorder point is:
Reorder when units on hand = lead time in days × average daily units sold
If your product sells 15 units per day and your lead time from order to FBA check-in is 45 days, you need to reorder when you have 675 units left. That seems like a lot — but if you miss that window, you'll run out before the next shipment arrives.
Add a safety buffer (typically 30–50% of your lead time demand) to protect against delays. Reorder point becomes: (lead time + safety buffer) × daily velocity.
The Monthly P&L That Matters
Revenue minus COGS minus Amazon fees minus ad spend gives you gross profit. That number is what you're actually distributing or reinvesting.
Track it per SKU monthly, not as a portfolio average. Portfolio averages hide which products are carrying the business and which ones are quietly destroying it. Most 50-SKU stores have 5–8 products that generate almost all the profit and 15–20 that are at or below break-even.
Cut the losers before you scale the winners.
The Seller OS
The Seller OS workflow on Reise walks through the full model: fee drag by category, FBA profit by unit, ROAS ceiling calculation, reorder timing, and a monthly P&L template. Run it before the next inventory decision, not after you've already ordered.
Unit economics aren't complicated — but they require doing the math before the order, not after the product lands and you're trying to figure out why margin is worse than expected.