profit margin

hello, as many of you may know I am in the process of starting an amazon store, and I am trying to determine what profit margin I should have for my products. Considering that amazon takes 15% of the selling price,and $1 for each item listed, what profit margin do you all think that I should have for my starter sets?

 

Log in or Sign up to hide this ad.

Almost doesn't seem worth it, especially if you have payment processing fees on top of everything else, unless you are selling higher priced items.

Does Amazon cover the shipping costs for Prime members, who get free shipping, I believe? (don't know, don't use Amazon)
Don't forget, the government wants "their share" of the profits, as well.

+ sell for $150
- your cost $100
- Amazon's cut $7.50 + $1.00 = $8.50
- govt's cut $12.45 (assuming 30% combined federal and state income tax)
net profit = $29.05
profit margin = 19.36%

This does not include your labor cost (time & effort) and other expenses, such as use and depreciation of your vehicle, if applicable.

That being said, if this is something that you are passionate about, and the numbers work for you, I wish you the best of luck.

 

In "real" retailing, if you go below 50% margin on cost of goods you'd better be planning on volume, and at 35% you're probably in trouble (assuming you're factoring labor as a cost, which you ought to be). Your stuff cannot be eligible for Prime unless Amazon physically has possession of it at one of their fulfillment centers, so shipping has to be factored as well.

 

Thank you for the information, It is very useful

you have a very good point, I almost forgot to factor in self employment and various other taxes, and thank you for the good luck

 

thank you all for the information it is very useful

 

Don't get me wrong - as long as you choose your product well and sell it well, you can and will profit doing this. I made money for years on Ebay (probably not much factoring labor, but I had fun doing it and that's a value-added all its' own), and I've no doubt selling coins can be a viable business model.

Just make it a business model and you'll be fine.

 

I don't use Amazon either, but he did say 15%. That would be;
- Amazon's cut $22.50 + $1.00 = $23.50
- govt's cut $8.45
profit margin = 12.03%

 

You are correct, sir.

Mistakenly, I calculated Amazon's cut on the "profit", not the sell price, which then reduces the government's "fair share", as Amazon's cost deflates his gross profit.

 

In the model Garlicus gave, his gross margin is 33%. In an eBay business, I'll bet he could get away with that. In grocery retailing, I know they need 40% on the top to hit the number they want at the bottom. Then again, their operating expenses are much higher. Nyquist, BTW, just won the Derby (he's 8 for 8, now).

 

Exaggerated did his usual finish, but Nyquist dismissed him. That horse has more than he shows. Hopefully the next two are dry, too - last year spoiled me and I want to see another Triple Crown before I die.

Margins can be a lot tighter in a sole proprietorship with no brick/mortar involvement; I'm basically trying to get the OP into the mindset of structuring it as a business (have a plan) and operating it as a business (winners sweat the details and control the environment).

 

On a side note, eBay comparison would be;

+ sell for $150
- your cost $100
- eBay's cut $9.00 + $0.50 = $9.50 (use the $0.50 for store fees)
- govt's cut $12.15 (assuming 30% combined federal and state income tax)
net profit = $28.35
profit margin = 18.9%

 

That's the mindset he should be in. It's all about that Income Statement, how you need it to look to make it worth it.

PS: Dave, got a hot tip for you. Betting money on horses is a sucker's game.

 

Yeah, well, I missed the Superfecta by one place. I had a feeling about Suddenbreakingnews and he damn near brought it home. A longshot like a Superfecta when there's already 3 clear in the pecking order isn't a terrible chance.

Don't ask how I got action in Philly.

 

I don't have to ask. That's not a hard one.

 

The rule of all success..........Now if we could find just the right one. I wish Brandon luck and success in his search.......

 

Thank you all for the great advice, I really appreciate it! I will defiantly remeber to sweat in the details, and to focus on the business model. I have no clue as to how successful this project will be, but I already know that it has, and will be a learning experience; something that is worth more than money and covers my original goal. Just to double check, the governments cut is based on net profits, not gross, is that correct?

 

This is correct. These days, I've found that nice, certified, eye appealing high grade coins are in demand. I pay a premium for rare, toned beauties. But the key is to buy them at the right price. I always pay well over bid. Sometimes well over retail. But I know that collectors will always want these coins. And if I price them at a percentage over my cost, I can make money - even on eBay.

Here's an example. I paid $410 for this coin. PCGS price guide is $340. Average eBay sales price for a common date XF45 is $300. I will price it at $750 obo and will likely accept anything around $575, which after fees and shipping nets me a profit of about 25% or, $102.50. This coin is currently at CAC. If it stickers, I'll up my acceptable price to $600, to cover my time and expense of sending it to CAC. BUT, with a coin this gorgeous, it wouldn't surprise me if a collector paid well over my acceptable price of $575/$600, making my profit margin grow significantly.

 

Nice coin. I'm wondering why the OP is interested in Amazon VS Ebay. If you have a substantial EBAY track record you can open an Ebay store and for coins the final sale fee is only 6%. Unfortunately, some other items don't get as substantial of a break on final sales fees - don't know why. I collect antique pocket knives and the ebay store sale fee is 9% on knives - only a 1% break. Why bother? But for coins that 4% break is great. So why would one want to use Amazon at 15%? There must be a reason?

 

Thank you for the information, these are great points! I will defiantly study coins, and the market much more frequently!