The five fees that decide whether a SKU is viable
Amazon FBA profitability is not a margin question, it is a fee-stack question. Two products with identical gross margins can have completely different net margins because one is a small standard item and the other is large oversize. Before you order inventory, you need each of these five numbers per unit.
- Referral fee: 15% of the total sales price for most categories, 8% for consumer electronics accessories and some media, with a $0.30 minimum.
- Fulfillment fee: determined by size tier and shipping weight, ranging from roughly $3.06 for a small standard item to $150+ for special oversize.
- Monthly storage: $0.78–$2.40 per cubic foot depending on season, plus aged-inventory surcharges after 180 and 365 days.
- Returns: your return rate multiplied by both the processing fee and the shrink on returned goods.
- Advertising: measured as TACoS (total ad spend ÷ total revenue), not ACOS, because TACoS reflects the real business rather than only the advertised portion.
Building the per-unit P&L correctly
The correct order is: start with selling price, subtract Amazon’s fees, subtract landed cost, subtract advertising, subtract returns. Every one of those is a percentage of price except returns, which is a percentage of orders multiplied by a fixed cost.
Net profit = Price
− (Price × Referral%)
− Fulfillment fee
− Storage allocated
− (Return rate × (Processing cost + Price × 5%))
− TACoS × Price
− Landed cost (FOB + freight + duty)| Line | Amount | % of price |
|---|---|---|
| Selling price | $39.99 | 100.0% |
| Referral fee | −$6.00 | 15.0% |
| FBA fulfillment fee | −$5.83 | 14.6% |
| Monthly storage | −$0.42 | 1.1% |
| Returns provision | −$0.70 | 1.7% |
| Advertising (TACoS) | −$6.50 | 16.3% |
| Landed product cost | −$10.05 | 25.1% |
| Net profit | $10.49 | 26.2% |
Why ROI on inventory capital matters more than margin
Two SKUs can both show a 25% net margin and behave completely differently. If SKU A turns its inventory six times a year and SKU B turns twice, SKU A generates three times the return on the cash you have tied up in stock.
This is why the model reports ROI on landed cost and, on the third tab, the capital efficiency ratio: annual profit divided by the cash required for one purchase order. A SKU with a 12% margin that turns eight times a year is a better business than one with a 30% margin that turns once.
- ROI on landed cost = net profit per unit ÷ (unit cost + inbound freight). Target 30%+ per turn.
- Inventory turns = annual units sold ÷ average inventory. Six or more is healthy for most consumer goods.
- Capital efficiency = annual profit ÷ cash tied up in one purchase order. Above 3x is scalable.
Size tiers, and why a half-inch matters
Amazon’s size tier system has hard boundaries. A product at 15.5 inches long is large standard; at 18.5 inches it may cross into small oversize, which roughly doubles the fulfillment fee. Packaging design therefore has a direct and quantifiable effect on unit economics.
| Tier | Longest side | Median side | Shortest side | Weight cap |
|---|---|---|---|---|
| Small standard | 15 in | 12 in | 0.75 in | 1 lb |
| Large standard | 18 in | 14 in | 8 in | 20 lb |
| Small oversize | 60 in | girth 130 in | — | 70 lb |
| Large oversize | 108 in | girth 165 in | — | 150 lb |
| Special oversize | >108 in | — | — | >150 lb |
Launch economics: the first 90 days are never profitable
New SKUs need velocity to rank, and velocity costs money. During launch, ACOS of 40–70% is normal and expected. What matters is whether the product can be handed to organic traffic after the launch window with a TACoS that leaves a real margin.
The third tab of the workbook models this as a cash flow: the initial purchase order is a cash outflow, and the monthly net profit is a series of inflows. If payback on the first PO exceeds four months, the SKU will consume cash faster than it generates it — which is survivable at one SKU and fatal at ten.
- Budget a launch period at 40–70% ACOS and a mature period at 10–20% TACoS.
- Model the first purchase order as cash out on day one, not spread across units sold.
- Add a 5–8% allowance for inventory that never sells and must be removed or written off.
How to use this tool
- Enter the selling price and landed cost. Use your real FOB price plus freight and duty per unit, not the supplier invoice alone. Landed cost is the only cost number that matters for margin.
- Confirm the size tier from your dimensions. Enter length, width, height and weight. The tool derives the tier and suggests the matching fulfillment fee, which you can override with your Seller Central figure.
- Add advertising, storage and returns. Use a TACoS figure from an existing SKU if you have one, or 15% as a starting point for a mature product. Set the return rate from your category benchmark.
- Download and model the batch cash flow. The workbook shows how much capital one purchase order ties up and how quickly it repays. Scale the shipment quantity and watch the capital efficiency ratio move.
What is inside the download
A per-unit P&L with every Amazon fee broken out, an editable fulfillment fee matrix with INDEX/MATCH tier derivation, and a 12-month batch cash flow simulator that shows the working capital a SKU actually consumes.
SKU Unit Economics— a separate worksheet inamazon-fba-profit-model.xlsx.Size & Tier Fee Reference— a separate worksheet inamazon-fba-profit-model.xlsx.Batch Profitability— a separate worksheet inamazon-fba-profit-model.xlsx.