Understanding Costs: How an Amazon Seller almost missed a winner!

Understanding Costs: How an Amazon Seller almost missed a winner!

We all know there's not much you can do to get around fees. The only way that you can maybe manipulate the fees is if you charge more for your product. But then as a percentage, your fees will go down, but you could outprice yourself to competitors.

What you can look at is your product costs and landed costs. That's where you have a lot more control.

Understanding Product Costs and Landed Costs 

Product Costs are what you pay the factory per unit.
Landed Costs are the total cost to get a shipment to its destination.
Right now, you might be averaging your shipping costs across a shipment— but there is a downfall to that method. You may have a pallet that has 50 units, and you may have another pallet that has 5,000 units. If you are allocating the cost across 5,500 units, you're not allocating the right proportion.

You have to proportionately allocate the costs based on the size and the cost of the skew.

If you have multiple products and multiple containers, using CBM (cubic meter) allows you to get a true, accurate shipping cost.

Recently, we were going through a trimming exercise with one of our clients, reviewing their product catalog for profitability. There was one product that was on the chopping block.

This product was falling out of range and it seemed like it wasn't fitting into the “winner” formula.

When we dug in, we found that it was a heavy product and it was delivered from the factory to the warehouse, and then it was shipped to Amazon which included Partner Carrier Fees.

Our solution was to ship it from China straight to FBA (Fulfillment by Amazon), and we were able to bypass the unnecessary shipping fees—shaving off around $1.25!

And now it is a winner.

Had we not done that in-depth analysis and got that true cost, he probably would have cut it and missed out on a winner.

I think that happens a lot.

Make sure you have 100% accurate numbers, you know those numbers, and then you can make good decisions.

How do you evaluate what a ‘winner’ is? 

In our new course “Profit Bootcamp” coming out soon, one of the things we teach is how to evaluate what a winner is.

We look at:

- How much does the product actually profit?
- What is the return on investment on the product?
- Does the product have a healthy profit margin?
- What is the product’s overall percentage of sales as a whole?
- You’ll learn how to find the winners and scale your profitably.  

Start your free trial today with SellerVue's cost tracking software.