Good Amazon sellers understand profit in the Age of Amazon can be complicated. Great Amazon sellers understand profit and how to protect every margin point they can. It is more than understanding the pricing of a product in a competitive environment. Great sellers know there is a cost to everything, every single step along the path from manufacturing a product, bringing it to market, to getting that product into the hands of consumers.
Knowing full product costs, expenses, fees and all the extras that go into bringing a product to the Amazon market, sets apart successful sellers from short timers on Amazon. The challenge is to find the right product with the right appeal with costs that allow for advertising and still leave enough profit to make the whole endeavor worth your time and energy.
Great sellers try to balance costs with growing a brand or product visibility and perpetuate the Amazon flywheel that translates to orders, sales and profit. So while great brands and sellers pay attention to their profits, they are willing to give some of that profit over to ensure visibility through advertising. This is also an area that can run away with all your profits if not properly planned for or managed. They pay attention to the ACoS metric.
Determining the ACoS Advertising goal for Amazon Ads should be a part of every strategic plan for bringing a product to market on Amazon.
A question that is often asked of professional account managers working in the Amazon Advertising space is: What is a good ACoS for my products? Or How does my ACoS compare to other advertisers in my product category?
There are really many answers to be given for that, since every seller’s situation can be unique. The simple fact is that the best ACoS is the one you can afford that brings the most product sales with the least amount of profit lost, regardless of what category the products are in. It comes down to specific business goals.
Vertical Rail has put together an ACoS calculator to help you figure out what your target ACoS should be, based on your product category, fulfillment type and shipping. There may be more fees you need to consider, but this will give you an idea of what percentage of your gross sales should be invested into Amazon Advertising.
If you run your numbers and feel like your Advertising costs are in alignment with your goals… GREAT! Keep on selling! But, if you are ending up with an ACoS that does not allow you to Advertise, it is time to fully audit your costs and goals.
When you are ready to go over your resulting ACoS numbers and see how that stacks up to others in your space, give Vertical Rail a call. We’ll look at your Amazon situation and see where you may be losing profit and better yet, where you should be advertising.
Are you making the PROFIT in AMAZON you think you are?
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