Important details about “ROI” and “ROI calculation”

There are two common ways to calculate your profit in the Amazon business – one is to consider the profit margin, and the other is to calculate Return on Investment. Now

Before Understanding ROI, first, understand PPU and Profit margin

PPU formula: Selling price – Total COG – Amazon fees

Example

Selling Price = 20 pounds

COG = 7 pound

Amazon fees = 3 pounds

VAT on Amazon Fees = 3 pounds

PPU = 20 _ 7 _ 3 _ 3 = 7 Pound

Just take the above example

Profit margin = 7 / 20 * 100 = 35%

Now let’s discuss ROI

When thinking about your Amazon ROI, it’s very important to factor in Amazon fees and the cost to ship your products to Amazon FBA warehouses. These expenses make a huge difference to the Amazon seller profit margin you are going to enjoy.

Example

For example, your product buying price is 7 pounds and your selling price is 20 pounds,

What will be your ROI?

ROI = PPU / COG + Amazon fees * 100

ROI = 7 / 7 + 3

7 / 10 * 100 = 70%

If you have any questions regarding this, Do ask in a comment.

Thanks