Over the last decade and especially over the last few years, the competition between sellers on marketplaces has become more and more fierce. Especially at Amazon, it is getting harder to win the buy box for certain categories and you need to be smart, innovative, and persistent to come out ahead. Particularly, one of the main issues that sellers face is the problem of calculating the optimal sales prices for their products. They often report that this is challenging mainly because of the competition. Moreover, they often get to the point where they change prices at least twice a week. Larger sellers even hire a separate person to only perform this task.
Selling Price and Profit Calculators
The selling price is of the highest importance for a business – this is not even a debate. Mistakes in these calculations can lead to unexpected losses and give competitors an advantage. To help sellers overcome this companies offer profit calculators online and in the case of Amazon, there are many options. These online tools let you easily determine the best pricing strategy, maximize profits, and forecast each sale’s taxes, commissions, and fees. Some more sophisticated calculators even allow users to calculate profit by ASIN or search by EAN to find all related ASINs, gaining valuable insights into profitability.
Amazon profit calculators have always been a topic of discussion between sellers and service providers. Many service providers admit that resellers on Amazon and Amazon private labels came to them because they were having trouble with defining their optimal sales pricing, so they could get maximum profit margins. Let’s look at some of the most common scenarios.
The first example is a typical Amazon seller that sells on several Amazon marketplaces around the world using the same price on all selling points, in every country, on every Amazon channel, no matter if they are FBA or FBM. This strategy is wrong and you should adjust your pricing if you want your business to prosper.
Amazon Product Fees
The problem here is that in this case, you are not taking into consideration the fees he will be charged by Amazon. They’re not only different across the marketplaces, but they differ within the same marketplace across the multiple programs that Amazon offers – such as FBA, EFN, and FBM. For example, at the time of writing this article Amazon fees for lip balm are 10%, but they are 15% for perfumes, even though they are both in the beauty category. On top of that these fees can go up without any warning. And how unlucky would that be?
A false conclusion is that your product is only suitable for one or just a few sales channels and even there you might not get the optimal profits you desire. If you do not use a profit calculator, eventually your business will stagnate and this will be very frustrating. A typical calculator will help you effortlessly define the optimal sales prices for all different marketplaces and achieve success on all selling points. Even if you end up with an Amazon marketplace where you believe that the profit margin is rather low, the calculator will at least make sure that nothing would eat away your profit. The next example will talk about huge profit margins.
This example illustrates some of the newer sellers on Amazon. Oftentimes, their strategy is to simply take the delivery cost and insert a huge margin on top of that. The assumption is that this big margin would take care of all the costs related to the sale. While mathematically this could be true, it’s not the optimal pricing strategy that you should follow in your online business. The problem lies in the fact that you do not have a clear understanding of how much margin you are pursuing and that the final selling price is not competitive.
In an ideal capsulated reality where you’re the only seller and there aren’t any competitors that would work perfectly! However, the reality is slightly different. A lot of industries today are very saturated and competition never sleeps. If you define your exact desired margin from the start, then the total selling price could go down, which translates into more sales and higher profits, despite the competition.
Profit Calculators and Automation
Our last example concerns experienced sellers. Having worked for many years in the industry you might come to a point where you perfect the formula for profit calculation and margin definitions. Normally, you would consider the following components in your calculations – shipping costs for each carrier you use in each country, VAT and country-specific costs, supplier costs, storage costs, cost of the goods, and the exchange rate. Then you would add the desired margin.
At first glance this is logical and correct, but what about the selling points and the custom fees and commissions that are coming up now and then? Because of your selling experience, this method could lead you to a decent profit, but what could have happened if you knew in real time the exact amounts of fees and commissions? The answer is that he would have added on average about 15% more profit.
These examples are here to describe some of the pitfalls that you might run into. Also, they illustrate how careful and precise you need to be when calculating your final selling price because it matters so much! Especially if you are just starting your Amazon selling journey, you need to know how to price your items correctly and be profitable from the start. Working with a profit calculator can be the difference between a struggling and a winning seller.
Realizing the importance of an optimal selling price, many sellers hire a separate person to do the calculations for the final selling prices of their products. In the beginning, it might give results, but the dynamic and competitive Amazon landscape requires that you recalculate prices at least twice a week to stay ahead of the competition. It is essential to have a reliable profitability tool at hand.
Once you fix your selling prices and you start receiving more profit, then the next phase is to grow your business. This is a different challenge that comes with its own set of problems. You can categorize some of them as “nice-to-have” problems, but they still require your attention and actions. Most times you manage to open more selling points using other marketplaces or different platforms where you build your websites. This is the time when you need a multi-channel ERP system. Essentially, you start looking for a place to run your entire business. You realize that it is very convenient to have one single place where you process orders, manage inventory, manage products, interact with suppliers, manage purchase orders, and much more.
Noverstock’s Profit Calculator
A typical company for this is Noverstock. They help you do all this by applying automation to as many day-to-day operations as possible, thus eliminating the possibility of human error in your business. Moreover, automation makes the business run faster, and more efficiently and requires less staff.
Based on customer feedback, one of the main strong points of Noverstock is the real-time business insights that are available out of the box. Business owners no longer need to wait for financial and accounting reports to find out whether their business is profitable or not and where exactly are the issues. Coming back to the Amazon profit calculator – this is one necessary tool to make sure that your profitability is in check and your business can continue to function. On average, sellers who use the calculator see a 15% increase in profitability.
To check out this calculator, simply visit Noverstock’s website or click here.
