This video explains why so many Amazon sellers in the UK are miscalculating their margins, and in some cases, running at a loss without even realising it. Most sellers look at their list price, subtract Amazon fees, and assume what is left is profit. That approach is flawed, and it is costing people serious money. This breakdown walks through the exact framework I use to calculate margins properly, the hidden costs sellers miss, and what healthy margins actually look like if you want a sustainable Amazon business.
The margin framework most sellers miss
The first step is understanding your true revenue. This is not just the sale price. You must factor in refunds, returns, and VAT correctly. If you are not netting these out, your revenue figure is inflated from the start. You can check category return rates directly inside Seller Central, which gives you a clearer picture of what actually sticks.
Next comes cost of goods sold and this is not just the unit price from your supplier. You need to include freight into the UK, import duties after Brexit, packaging, labelling, and any prep required before the product is ready to sell. Every cost that gets the product into a sellable state needs to be counted.
Amazon fees and operational costs
Amazon fees go far beyond the referral fee. You need to account for FBA pick and pack fees, shipping, storage, removals, and return processing. These fees vary by size, weight, and category and they change regularly. If you are working off old numbers, your margin calculations are already wrong.
Operational overheads are another area sellers ignore. If you use merchant fulfilment, you need to include warehousing, staff wages, software tools, customer service, returns handling, quality control, compliance, and VAT accounting. Ignoring these costs creates a profit number that simply does not exist in real life.
Advertising and the hidden margin killers
Advertising and promotions can quietly destroy profitability. Amazon PPC, coupons, and deals all chip away at margins if they are not managed carefully. I regularly see sellers lose several percent of revenue without noticing due to overspending on ads, missing reimbursements, damaged stock, lost inventory, and return discrepancies. Dimensional overcharges are another common issue where packaging pushes a product into a higher FBA fee bracket.
When you add all of these together, you arrive at your true margin. It usually looks very different from a simple list price minus fees calculation.
The most common pitfalls
Storage creep is a big one. Slow moving stock racks up long term storage fees and damages your IPI score, which affects how Amazon treats your inventory. Static fee assumptions are another problem. Amazon changes fees frequently and many sellers never update their calculations.
UK specific costs after Brexit also catch sellers out. Import duties, cross border VAT, and multi country fulfilment are still being calculated incorrectly by many businesses. Reimbursement audits are often ignored too. Amazon regularly owes sellers money for lost stock, incorrect returns, or damaged items. These small amounts add up quickly.
What healthy margins actually look like
Once everything is factored in, most strong UK sellers aim for net margins between twenty five and thirty five percent. That is after all costs, not just Amazon’s cut. In some niche categories, with tight operational control, margins can go higher. The point is not chasing a perfect percentage. It is understanding your cost base so you can make informed decisions about pricing, ads, and expansion.
Final takeaway
Margin is not just a number on a spreadsheet. It decides whether your business grows, survives, or slowly bleeds cash. If you are not tracking every cost line, from ad spend to reimbursements to returns, start now. Small leaks sink big ships. Use transaction reports in Seller Central to see what you are actually being charged, not what you think you are being charged.
If this was useful, watch the full video above and let me know in the comments what part of margin tracking you find hardest right now.
