Amazon ROI FAQ: the ROI formula, which costs to include, healthy benchmarks for FBA sellers, and how ROI differs from profit margin.
What is ROI and how is it calculated?
ROI (Return on Investment) = net profit divided by total invested capital, usually annualized. For an Amazon product, invested capital typically means inventory at cost plus inbound freight; net profit is revenue minus COGS, Amazon fees, and advertising. A product that returns $30 profit on $100 of tied-up capital has a 30% ROI per inventory turn.
Which costs should I include in the calculation?
Include everything cash-out: unit COGS, international freight, tariffs, Amazon referral and fulfillment fees, storage, PPC spend, and samples or photography amortized over expected sales. The most common error is excluding capital tied up in slow-moving inventory — which is exactly what ROI is designed to expose.
What is a good ROI for Amazon FBA products?
For a healthy, scalable catalog, aim for 30%+ ROI per inventory turn and 3-4+ turns per year (roughly 100%+ annualized). Below 20% per turn, capital efficiency is poor — you would often do better putting the money into your best SKU. Below break-even, obviously, stop replenishing.
How is ROI different from profit margin?
Margin measures profitability per sale (profit / price); ROI measures profitability per dollar of capital deployed. A 20% margin product that turns inventory 6 times a year can beat a 35% margin product that turns twice. Fast, cheap products often have low margins but excellent ROI — which is why volume sellers watch ROI, not margin alone.
Can I compare products or scenarios with the calculator?
Yes. Save each product as a scenario with its own costs, price, fees, and expected turn rate, then compare annualized ROI, payback period, and capital required side by side. It is the fastest way to decide where your next inventory dollar should go.
