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Revenue is growing, margin is disappearing. Why does the Amazon dashboard give an incomplete picture of the business?
Monday meeting. The dashboard is glowing green.
Revenue has increased by 30%. There are more orders. The team is considering increasing the Amazon Ads budget and entering another marketplace.
However, a question arises:
How much did we actually make from this growth?
The answer does not appear immediately. Sales are in one report, advertising spend in another, fees in a third, and the product cost is in the ERP or a separate spreadsheet.
The growth is visible. Its profitability still remains a mystery.
Table of Contents:
Revenue shows how much was sold
£100,000 in sales can mean a £10,000 result
Sales can grow faster than margin
ACOS, TACOS, and margin answer different questions
How to check net margin per SKU on Amazon?
A single dashboard will not solve the problem of bad data
FAQ - Frequently Asked Questions
This article takes 4 minutes to read.
Revenue shows how much was sold
The revenue metric answers one question: what was the value of sales in a given period.
However, this number is not enough to assess the profitability of sales on Amazon. The product's result changes after taking into account:
Returns and refunds
Sales commissions
FBA fee or FBM fulfilment cost
Amazon Ads spend
Purchase or production cost
Transport and product preparation
Other costs assigned to the SKU or market
Amazon provides financial reports and tools such as SKU Economics and Profit Analytics. They can combine data on sales, fees, advertising, returns, and costs. Amazon itself also points out that values in Business Reports and Payments may differ due to a different method of accounting for orders and fees.
Therefore, revenue is not an incorrect number. It is an incomplete number when we make scaling decisions based on it.
£100,000 in sales can mean a £10,000 result
Let's look at a model SKU:
Element | Value |
Revenue | £100,000 |
Returns and refunds | -£5,000 |
Product cost | -£38,000 |
Amazon commissions | -£15,000 |
FBA fee | -£12,000 |
Amazon Ads | -£20,000 |
Result before other costs | £10,000 |
The dashboard shows £100,000 in sales.
After deducting basic costs, £10,000 remains, even before taking into account some of the company's operating costs.
This simulation does not describe a typical level of fees or margin. It shows the mechanism: growing revenue may look good until we compare it with the full cost of generating those sales.
Sales can grow faster than margin
Let's assume that in the first month, the company achieved £100,000 in revenue with Amazon Ads spend at £15,000.
TACOS is then 15%.
In the following month, revenue grows to £130,000, and advertising spend to £25,000.
Sales grew by 30%. The advertising budget increased by 66.7%, and TACOS reached 19.2%.
The company is still selling more. However, every pound of revenue is more heavily burdened by the cost of advertising.
The increase in TACOS alone does not determine a drop in profitability. It may be justified during a product launch, entry into a new market, or acquiring new customers. However, it requires checking along with the product margin, organic sales, and campaign goal.
ACOS, TACOS and margin answer different questions
ACOS shows the ratio of advertising spend to sales attributed to advertising:
ACOS = advertising spend ÷ sales from advertising × 100%
Amazon emphasises that the target ACOS depends, among other things, on the product margin, category, and campaign goal. The metric itself should not be the sole basis for evaluating advertising activities.
That is why when running Amazon Ads, campaign results should be analysed not only through ACOS and ROAS, but also in the context of the margin of the advertised products.
TACOS compares advertising spend with total sales:
TACOS = advertising spend ÷ total revenue × 100%
As a result, it shows how the cost of Amazon Ads changes relative to paid and organic sales. Amazon describes TACOS as a broader complement to ACOS, because ACOS only includes sales attributed to advertising.
Margin answers the most important business question:
How much money is left after deducting costs?
A good ACOS does not guarantee a profitable product. A low TACOS is also not enough when a SKU has a high purchase cost, many returns, or unfavorable FBA fees.
How to check net margin per SKU on Amazon?
A single model is needed, combining several sources:
sales and reporting data from SP-API
financial data on fees and returns
campaign results from Amazon Ads API
product cost from ERP or company database
additional costs in line with the company's financial methodology
The Reports API allows you to automatically download reports regarding, among other things, orders, inventory, and returns. The Amazon Ads API allows you to download data on costs and campaign results.
Combining this data allows you to see in one place:
revenue per SKU and marketplace
value of returns
commissions and FBA fees
Amazon Ads spend
ACOS and TACOS
product cost
margin according to the established model
Automation removes the need to manually download reports, match periods, and merge sheets. We have also separately calculated how much manual processes in e-commerce can cost when the same activities are repeated every week. The team receives a result that can be used before increasing the budget, changing the price, or entering another market.
A single dashboard will not solve the problem of bad data
Simply connecting the API does not guarantee a correct result.
First, you need to establish:
How the company defines revenue
When it accounts for returns
Which costs it attributes to SKU
How it accounts for exchange rate differences
How it treats VAT
According to which period it links sales with advertising
Which costs it considers direct and which overheads
Only after agreeing on the methodology can you build an automation whose result will be consistent with the company's finances.
At Go2Market, we start with the decision that the report is meant to support. Then, we combine data from Amazon, Amazon Ads, and internal systems into a model showing profitability per SKU and marketplace.
Let's check if the growth of your best-selling products also increases the margin. We will combine sales, advertising, and cost data into a single profitability model.
FAQ - Frequently Asked Questions
What is the difference between revenue and profit on Amazon?
Revenue shows the value of sales in a specific period, but does not take into account the full costs of generating it. To assess the actual profitability of sales on Amazon, you need to take into account, among others, returns and refunds, commissions, FBA fees or FBM costs, Amazon Ads, product cost, and other costs assigned to a given SKU or market.
How to calculate product profitability on Amazon?
To calculate profitability per SKU, you should compare sales revenue with the costs associated with a specific product. These can include purchase or production costs, Amazon commissions, FBA fees, returns, advertising spend, as well as transport and product preparation. The range of costs included should result from the company's financial methodology.
What is the difference between ACOS and TACOS?
ACOS shows the ratio of advertising spend to sales attributed to advertising. TACOS, on the other hand, compares Amazon Ads spend with total revenue, including paid and organic sales. Both metrics help analyse advertising but answer different questions.
Does a low ACOS mean that a product on Amazon is profitable?
No. A low ACOS indicates the relationship of advertising costs to sales generated by campaigns, but does not take into account all product costs. A SKU can have a good ACOS and at the same time low profitability due to high product cost, FBA fees, commissions, or returns.
Does an increase in sales on Amazon always mean an increase in profit?
No. Revenue can grow faster than margin. For example, sales growth may require significantly higher Amazon Ads spend or generate additional costs related to order fulfilment. Therefore, scaling decisions should not be made solely on the basis of sales growth.
What data is needed to analyse profitability per SKU?
A profitability model can combine data on revenue, returns, commissions, and FBA fees with Amazon Ads costs and product costs from ERP or the company database. Depending on the adopted methodology, other costs assigned to the SKU and marketplace can also be included.
Can you automatically calculate the profitability of sales on Amazon?
Yes. Data regarding sales, orders, inventory, and returns can be combined with Amazon Ads results and product costs from internal systems. Automation allows you to reduce manual report downloading and create a single model showing profitability per SKU and marketplace.
Why might data from different Amazon reports differ?
Individual reports may use a different method of accounting for orders and fees. Therefore, before building a common dashboard, you need to establish, among others, the definition of revenue, the method of accounting for returns, settlement periods, VAT, exchange rate differences, and the method of allocating costs.
I would keep these 8 questions in the final version. Especially the first five cover information queries well for SEO/AEO, and the last three naturally lead from the profitability problem to the solution in the form of integration and data automation.
Sources
Amazon Seller Central - differences between reports, SKU Economics, and Profit Analytics.
Amazon Ads - definitions and application of ACOS and TACOS.
Amazon Developer Documentation - SP-API Reports and Amazon Ads API.
The presented calculations are a simulation showing the cost mechanism. The actual margin depends on the category, logistical model, product costs, level of returns, advertising spend, and the company's financial methodology.
Go2Market