Cost calculation is a necessary step that needs to be done smartly because it can lead to loss or profit in your online Amazon business. The choice of the product is should also be considered because some products are more profitable than others. Read the article most profitable amazon products. It is a complete guide to startingan Amazon business.
Calculation of the product’s cost is a crucial factor as it helps to decide an appropriate price for your products. But calculating your product’s cost can also be a tough task. Before selecting a product’s price, shipment and manufacturing values should be considered strictly to earn handsome profit through your product sales on amazon.
Here are some cost factors that are necessary to keep in mind while fixing your product’s price.
Storage Cost: FBA (fulfillment by amazon) is a service that helps the sellers to stock their products in the fulfillment centers of Amazon but the seller needs to pay an additional fee if he is using this service. However, you can save this fee, if you are fulfilling all the products by yourself.
Shipping Cost: Shipping cost involves the price to transport your material from the manufacturing area to amazon’s fulfillment centers or your storage areas of the product. If you are importing your products from other countries then it can be heavy on your pockets especially if you are starting a new business. Importing products from China may not be expensive, so you can start importing your products from China.
Marketing Cost: The cost that you spend for the advertisement of your products, to the content writers, graphic designers, and marketers. The cost that you spend to make these products available for the customers is also counted in this category.
Labor cost: The money that you pay to the people who were engaged to prepare your product is counted as labor cost. It is strictly counted in the final price of the product.
Cost of raw materials: The materials that were used to bring your product in the final form are counted as raw materials. For example, the cost of the cloth that you used to stitch shirts will be counted as raw material cost.
Cost of returns: If the customer returns your product then you will have to bear an additional fee due to lost profit.
Taxes: Different countries have a different amounts of taxes. You can also consider this amount before finalizing your product price. Calculate all these costs and then decide the final price of your product to earn a handsome profit.
To get the total value that you spend in the manufacturing of the product, add up all the costs and then divide it by the total number of the items that you manufactured and transported to the warehouses.
You should also calculate the percentage of the profit that you want to gain from every single piece of product. Getting sales is not the only factor of a successful business but you should also earn enough profit to invest in the manufacturing of more products.