Short answer: Selling on Amazon can drive volume quickly, but fees and advertising can quietly consume most of the margin. True profitability on Amazon means accounting for referral fees, fulfillment and storage fees, advertising, returns and inbound freight by SKU, then deciding which products deserve more investment and which need a price change or an exit.
The costs to track by SKU
- Referral fees: a percentage of the sale price that varies by category.
- Fulfillment fees: pick, pack and ship costs based on size and weight.
- Storage fees: monthly and long-term storage, higher for slow movers and peak months.
- Advertising: sponsored product, brand and display spend.
- Returns and reimbursements: refunds, damaged units and claims.
- Inbound freight and prep to get inventory into fulfillment centers.
Metrics that matter
| Metric | Why it matters |
|---|---|
| Contribution margin by SKU | Profit after all variable costs |
| TACoS (total ad spend ÷ total sales) | Advertising efficiency across paid and organic sales |
| Inventory performance | Affects storage limits and fees |
| Return rate by SKU | Signals quality or listing issues |
Ways to protect margin
- Reprice or bundle SKUs with thin contribution.
- Optimize packaging dimensions to lower fulfillment fees.
- Manage inventory to avoid long-term storage charges.
- Shift ad spend from broad terms to profitable keywords.
- Diversify into your own website and other channels to reduce dependence.
How Capstone CFO helps
- Reconcile Amazon settlement reports to your books each month
- Build SKU-level profitability including every fee and ad dollar
- Set advertising budgets by contribution, not just sales
- Forecast inventory and cash for Amazon replenishment cycles
- Plan multi-channel growth to reduce platform risk
Frequently asked questions
Why do my Amazon sales not match my bank deposits?
Amazon deducts fees, refunds and reserves before paying out. Settlement reports need to be reconciled line by line.
What is a healthy TACoS?
It varies by category and growth stage; what matters is the trend and whether contribution after advertising is positive.
Should we sell through Amazon or our own site?
Many brands use both: Amazon for reach, their own site for margin and customer data.
Selling on Amazon? See how we support e-commerce and digital retail brands or book a call with our CFO team.