What is Net Margin?
Net Profit Margin
Net profit as a percentage of the sales price, after Amazon's fees, cost of goods, advertising and returns.
The Formula
Net Margin = (Sales Price − Amazon Fees − Your Costs) ÷ Sales Price × 100
Net margin is the share of the sales price you actually keep. Where contribution margin stops before advertising, net margin carries on through every variable cost of getting that unit sold and delivered.
Two columns, kept apart
The useful discipline is to separate what Amazon charges from what you spend:
| Amazon fees | Your costs |
|---|---|
| Referral fee and closing fee | Landed cost of goods |
| FBA fulfilment fee | Advertising |
| Inbound placement | Returns and storage spread per unit sold |
Net proceeds is price less the left column. Net profit is net proceeds less the right column. Keeping the split means a merchant fulfilled programme, where your own pick and pack sits on the right, stays comparable with FBA, where the equivalent cost sits on the left.
Worked example
Suppose a unit sells for £30 with £8 of Amazon fees, £7 of landed cost, £3 of advertising and £1 of returns cost.
- Net proceeds = 30 − 8 = £22
- Net profit = 22 − 11 = £11
- Net margin = 11 ÷ 30 = 36.7%
Margin and return on investment answer different questions
Margin measures how much of the customer's money you keep. Return on investment measures how hard your own money worked, so the answer depends on what you count as invested. Against the whole right hand column, £11 of profit on £11 of costs is a 100% return. Against the £7 of stock alone, the more common convention for a seller judging a reorder, the same £11 is about 157%. Neither is wrong and they are not comparable, so name the base whenever you quote the figure. A high margin product that ties up cash for six months can still be a worse business than a thinner one that turns over monthly.
Reading it honestly
- Zero cost is missing, not free. A product with no cost recorded shows an impressive margin that is entirely an artefact. Exclude those rows or mark them as unknown.
- Portfolio margin is weighted. The average of unit margins is not the margin of the business unless every product sells the same amount. Weight by revenue.
- Per unit sold is not per unit stored. Storage and removals accrue on inventory you hold, so spreading them over units sold flatters a fast seller and punishes a slow one, which is usually the honest answer but should be a conscious choice.
What it is not for
Net margin is a scoreboard, not a lever. Advertising targets are set against break-even ACoS and contribution margin, because those isolate the one cost you can change today. Watching net margin tells you whether the strategy is working. It does not tell you which bid to move.
Examples
- →£30 − £8 Amazon fees − £11 of your costs = £11 net profit, a 36.7% net margin
- →The same £11 measured against the £7 of stock committed is about a 157% return
- →A product with no cost recorded shows a false margin, not a good one
Related Terms
Contribution Margin
The money a unit leaves behind after Amazon's fees and cost of goods, before advertising is paid for.
Break-Even ACoS
The ACoS at which an advertised sale makes neither profit nor loss: contribution margin divided by price.
COGS
The landed cost of a unit: production plus freight. Amazon never supplies it, so the seller has to enter it.
AOV
Average order value: total sales divided by orders. Not the same as unit price when orders contain several units.
Track your Net Margin automatically
Shurq monitors all your key metrics in real-time and optimizes your campaigns 24/7.