How to ensure an adequate margin on Amazon sales?

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Is your company considering starting a product sale in the Amazon online store? Not sure what kind of coverage you can expect? Or do you want to know the sales potential of your product in another Amazon market?

Amazon currently operates in 18 markets. You should choose the market carefully, as they differ significantly. The same product can have very different sales prospects in different Amazon markets. With a margin analysis done by Your Amazon Partners, you can find out the sales potential of your product in different markets.

When pricing a product, it is good to remember that the more value the customer gets, the more they are willing to pay for the product.

The longer-term trend at Amazon is that high-quality and value-added brands are producing the highest and most sustainable margins (Amazon product life cycle) in an increasing number of product categories. Therefore, Finnish companies have a good starting point for positioning with a high margin.

You can also significantly increase the margin level of a product by understanding and utilizing the operation of the Amazon algorithm and positioning the product correctly in the market.

Amazon’s sales margin is calculated in the FBA model (Amazon handles warehousing and logistics) using the following formula:

  • Selling price
  • Product manufacturing cost
  • Product delivery to Amazon stock
  • FBA costs (primarily affected by product price, size, and weight)

In addition, any Amazon internal and external advertising costs will be deducted from the margin. In North America, sales tax is added to the sales price, i.e., the sales price is the net price. In Europe, the tax is deducted from the sales price.

So there are more costs to selling on Amazon that you need to be able to estimate before deciding to sell a product. The trend in Amazon and manufacturing and logistics costs has been upward in recent years. Therefore, it is crucial to calculate the margin correctly when choosing a product and market.

In terms of margin, the market matters

When looking at the Amazon market, you often come across that the tougher the market, the lower the margins you get. In general, competition is fiercest in the American market. If you find that prices in the American market have been trampled so low that it is no longer attractive in light of the margin, you may want to look to other markets or pursue a hybrid model for them.

When pricing a product, it is good to remember that the more value a customer gets, the more they are willing to pay.

For example, for a high-quality, elegantly packaged Finnish brand and product, they are usually willing to pay more than for a bulk product made in China. The long-term trend in Amazon is turning to high-quality, value-added brands producing the highest and longest-lasting margins, so Finnish companies are in a good position in this regard. Sustainable growth at a high margin level is created through higher product quality and differentiation factors.

In addition, a product supported by Amazon’s algorithm may be priced more expensive. Not all customers may buy the product at a higher price, but when the organic visibility of the product is strong, there will still be enough profitable sales.

A comprehensive Amazon market analysis also pre-determines the likely margin level for the products, allowing the investment decision to be made based on better understanding and information. It is important to identify low margins in advance. Significant sums can be saved by deciding not to enter the unprofitable Amazon market.

Find out the Amazon sales potential of your product. Our margin analysis gives you a clear idea of ​​what kind of margin you can expect to receive from your product in the Amazon market you want.