If you’ve searched online for anything to do with Amazon FBA, you can almost guarantee that you’ll have come across countless articles & videos from people that say they’ve made hundreds of thousands selling on Amazon (all in a single month)… BUT what they often won’t reveal though is that the big figure they’re talking about is revenue – not profit.
Whilst hitting high revenue figures is impressive and can give insights into how big their Amazon FBA business is, what people really want to know is how much profit has been made.
Given that my business has grown quite a bit since my last update, I thought it would be a good time to give you an insight into exactly how my Amazon fba business performed over up until July 2022… and I’m not just talking about revenue performance. I’m talking sales, revenues, amazon costs and expenses, and above all else… PROFIT!
I want to give you a really clear idea of what it’s like to be an Amazon FBA seller, so rather than just talking about top line like all the other guys out there, we’re going to be taking a much deeper dive.
Amazon FBA Revenues & Orders
So, firstly, lets start off with the numbers that most people aren’t afraid to talk about if they actually do sell. Sales and orders. Over the past 3 months, the number of orders I’ve had from customers has increased quite a bit, which was helped by me managing to stay in stock for most of the period, and the fact that I launched 2 new products.
In total I sold 25,233 units – or around 280 units on average per day – and these sales mainly came from 5 of my top selling products. In fact, one of the products that I only found and launched back in January sold 5610 units, or 25% of my total sales, which is amazing.
Total revenues for the last 3 months came to £391,000, which means that I have an average selling price of around £15, which is very much a price that’s at the sweet spot for customers.
When looking to price any product that you want to sell on Amazon, you should look to take a goldilocks approach, that’s not too high, but not too low – instead it’s just right. Ideally you want to sell something that’s not so cheap that the profit per unit that you get isn’t worth getting out of bed for, but not so expensive that a customer has to think twice about purchasing, which could lead to them wanting to sleep on their decision and then forgetting to buy from you, or choosing a competitor instead. So look for a product to sell that is priced at least £12 or $14, all the way up to £30 or $35. Of course you can be successful if you choose to price a product outside of this range, but in my experience £12-30 is the sweet spot.
VAT & Deal Fees
So, that’s sales and orders out of the way, lets now get to the interesting stuff – the costs! Of the £390,000 revenue that I made because I’m VAT registered, £62,000 goes to her majesty’s revenue & customs once it’s been reduced by any VAT expenses that I have. An annoying and large expense to have, but something that should always be factored in to profit calculations if applicable.
Over the past few months I also ran a number of deals and provided customers with promotions and coupons in order to entice them to buy, which came to £6,500 in total. Whilst that may seem a high figure, I know that it’s one of those ‘necessary’ expenses that will pay off in the long run.
Running a promotion, deal or coupon on Amazon is a great way to help increase your product’s level of conversion, which ultimately is going to mean higher sales and a better page ranking, giving you much higher profits. So whilst you may be reluctant to sell your product at a discounted price because it means less profit for you, think about the long term effect – if the discount that you offer resonates with customers, you should see your orders increase, meaning your Amazon page ranking will improve, helping you to make more organic sales and profit overall.
Amazon FBA Fees
Next up we have good old Amazon fees, which mainly comprise of referral fees – so, Amazon’s commission for each sale that I make on their site – and fulfilment fees – which are the charges that Amazon makes for picking, packing and posting the product to the customer. In total, I spent £59,000 in referral fees, and £60,000 on FBA fees, which is around 30% of my total revenues, pretty typical for selling on Amazon.
Amazon Advertising Costs
As an Amazon FBA seller, you can pretty much guarantee that you are going to need to advertise in order to get your product seen by as many customers as possible. Amazon’s advertising system is Pay Per click, which literally means that they will only charge you when a customer clicks on your ad, rather than just sees it. Over the past 3 months I spent £58,000 on advertising, which works out around 18% of my net revenue. This was a little higher than I’d like, but I did launch a number of number of new products throughout the period and outsourced my advertising to an agency, increasing costs in the short term, so hopefully this will be lower over the next few months.
Advertising on Amazon is a necessary evil, because whilst it does suck to have to pay for it in the short term, it does help boost profits massively in the long term as it will allow you to get more reviews, a better page rank position, and more sales.. ultimately meaning more profit. In order protect as much of your profit as possible, try to aim to keep your long term advertising spend between 10-15% of your total sales figures.
The final bucket before we go onto my costs, is Amazon’s reimbursements, which totaled £1,600. Occasionally, Amazon will lose some of your stock, or a customer will claim for a refund but not actually return the product, which should result in Amazon making a reimbursement to you. The reimbursement process can sometimes be automatic, but most of the time you’ll need to make a claim yourself, which you can either do manually, or with the help of a company named Getida.
The process with Getida is really straightforward – you provide them with certain permissions via your amazon account, they check what you’re eligible for, make the claim for you, and then take a proportion of what they claim back if they’re successful. A really handy service that I’d recommend you do, especially if you can’t be bothered to do it yourself.
My Other Costs
Over the past 3 months, the total value of the stock that I sold was £99,000 – so that includes manufacturing costs, duties and taxes, and shipping charges. Other costs that I incurred were: storage costs – at £900, PPC agency fees of £4,000, and image design fees of £200. That was pretty much it for costs incurred by me outside of Amazon, which really puts it into perspective just how fantastic this business model is – no other overheads, rent costs, or staff costs at all, how good is that?
Amazon FBA Profit
So, now we’ve run through revenue and expenses, we can calculate the figure that you’re all here to see… the profit.
In total, over the past 3 months, my profit came to….
This is a figure I’m really happy with, especially as it’s Amazon FBA is still a side hustle for me that I do in my spare time. What’s also really encouraging is that when looking at my profit over each individual month, £20,000 was made in the most recent month, so my sales and margins are steadily improving, which puts me in a good position to achieve a higher level of profit in next quarter’s update.
Hopefully you enjoyed this profit update and it’s given you the encouragement to get started.
Remember that I’ve earnt all of this with minimal hours being spent on the business – whilst it’s not completely passive, it is a very handsoff business that generates nice amounts of cash each month, and it can eventually be sold to an investor. So get started if you haven’t already & watch my free training.
If you’d like to be mentored by me & learn how to become an Amazon FBA seller, take a look at the Smashers Academy.
You can also read my review on my own experiences of Amazon FBA here.