Name: GoMarginify
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E-commerce profit glossary

A

ACOS: Advertising Cost of Sale, the percentage of ad spend relative to ad revenue. Lower ACOS means more efficient ad spend. Amazon sellers track this to optimize ad campaigns.; e.g. If you spent $300 on ads and made $1,500 in sales, your ACOS is 20%.
Ad Spend: The amount of money spent on advertising to promote your products. Ad spend can be allocated across various channels, such as sponsored ads, display ads, or social media ads.; e.g. We increased our ad spend by 20% last quarter, focusing on high-converting keywords.

B

Break-even: The point at which total revenue equals total costs, meaning you're neither making a profit nor a loss. Calculating your break-even point helps you understand how many units you need to sell to cover your costs and start making a profit. It's a crucial metric for pricing strategies and financial planning.; e.g. If your fixed costs are $1,000 and you sell each unit for $10 with a variable cost of $6, you need to sell 250 units to break even.

C

COGS: COGS, or Cost of Goods Sold, includes direct costs like product manufacturing, packaging, and shipping to your warehouse. It doesn't include indirect costs like marketing or salaries. For SKU B07X, if the product cost $12 and shipping to the warehouse was $3, your COGS is $15 per unit.; e.g. For SKU B07X, if the product cost $12 and shipping to the warehouse was $3, your COGS is $15 per unit.
chargeback: A forced refund initiated by the payment processor or bank, often due to disputes or fraud. Chargebacks can result in fees and lost revenue. Sellers must address disputes promptly to minimize chargebacks.; e.g. A customer disputed a $50 charge, resulting in a $25 chargeback fee.
Contribution Margin: The difference between the selling price of a product and its variable costs. Contribution margin helps you understand how much money is available to cover fixed costs and contribute to profit. A higher contribution margin means more money is available to cover fixed costs and increase profits.; e.g. If you sell a product for $20 and the variable cost is $12, your contribution margin is $8.
Cash Flow: Cash flow is the movement of money in and out of a business. Positive cash flow means you have more money coming in than going out, which is essential for covering expenses and investing in growth. Negative cash flow can lead to financial instability.; e.g. If you generate $10,000 in sales but have $8,000 in expenses, your cash flow is positive by $2,000.

F

FBA Fees: FBA fees are charges for using Amazon's fulfillment services, including storage, picking, packing, and shipping. Fees vary by product size and weight. For a standard-size item priced at $20, FBA fees might be around $4, including a $2.41 fulfillment fee and a $1.59 monthly storage fee.; e.g. For a standard-size item priced at $20, FBA fees might be around $4, including a $2.41 fulfillment fee and a $1.59 monthly storage fee.
Fulfillment Fee: A fee charged by a marketplace or third-party logistics provider for picking, packing, and shipping your orders. Fees vary based on product size, weight, and shipping method.; e.g. Amazon charges a $3.20 fulfillment fee for a standard-size item shipped to a domestic address.

G

Gross Margin: Gross margin is the difference between revenue and COGS, expressed as a percentage. It shows how much you earn from each dollar of product sales before other expenses. If your revenue is $5,000 and COGS is $3,000, your gross margin is 40%.; e.g. If your revenue is $5,000 and COGS is $3,000, your gross margin is 40%.

I

Inventory Turnover: Inventory turnover measures how often inventory is sold and replaced over a period. High turnover indicates strong sales, while low turnover may signal overstocking or weak demand. Tracking this metric helps optimize inventory levels and reduce holding costs.; e.g. If you sell $50,000 worth of inventory and your average inventory value is $10,000, your inventory turnover is 5.

L

Landed Cost: The total cost of a product including purchase price, shipping, customs duties, and other fees. Landed cost helps you understand the true cost of goods sold (COGS) and set competitive prices. Ignoring landed costs can eat into your margins, especially when sourcing from overseas.; e.g. If you buy a product for $5.00, shipping is $2.50, and customs duty is $1.00, your landed cost is $8.50.

M

Multi-channel: Selling your products through multiple sales channels, such as your own website, Amazon, eBay, and social media platforms. Multi-channel selling can increase your reach and sales volume, but it also requires careful inventory and order management to avoid overselling or stockouts.; e.g. You sell your products on your Shopify store, Amazon, and eBay to reach a wider audience and increase sales.

N

Net Profit: Net profit is the bottom line after all expenses, including COGS, fees, and operating costs, are subtracted from total revenue. It's what you actually take home after all costs are paid. If your revenue was $10,000 and total expenses were $7,200, your net profit is $2,800.; e.g. If your revenue was $10,000 and total expenses were $7,200, your net profit is $2,800.

O

Operating Expense: Operating expenses (OpEx) are the costs required for running a business's core operations. These include rent, salaries, and marketing. Keeping OpEx low is crucial for maintaining profitability, especially in competitive markets.; e.g. If your monthly rent is $1,500 and you pay $2,000 in salaries, your total OpEx is $3,500.

P

Payout: The transfer of funds from a marketplace or payment processor to your bank account. Payouts typically occur on a regular schedule, such as weekly or bi-weekly, and may be subject to processing fees or holds. Tracking your payouts is essential for managing your cash flow and ensuring you're paid for your sales.; e.g. Amazon sends you a payout every 14 days, minus any fees and holds.
Profit Margin: Profit margin is the percentage of revenue that exceeds costs in a given period. It's a key indicator of a business's financial health and pricing strategy. A high margin means you're keeping more of each dollar earned after covering expenses.; e.g. If you sell a product for $20 and your cost is $12, your profit margin is 40%.

R

Referral Fee: A referral fee is a percentage of the total sales price that Amazon charges for referring the customer to you. It varies by category, typically ranging from 6% to 20%. For a $50 item in the Home category, you'd pay a 15% referral fee, which is $7.50.; e.g. For a $50 item in the Home category, you'd pay a 15% referral fee, which is $7.50.
ROAS: Return on Ad Spend, the revenue generated for every dollar spent on advertising. Higher ROAS indicates better ad performance. Sellers use this to measure ad efficiency.; e.g. A $300 ad spend generating $1,500 in revenue gives you a 5:1 ROAS.
refund rate: The percentage of orders that result in refunds. High refund rates can indicate product or fulfillment issues. Sellers monitor this to maintain customer satisfaction.; e.g. If you had 50 refunds out of 1,000 orders, your refund rate is 5%.
Return Processing: The handling of returned items, including inspection, restocking, and refunding customers. Some marketplaces charge fees for return processing, while others offer free returns to customers.; e.g. SKU B07X lost 12% margin last month due to a high return rate and processing fees.

S

SKU: Stock Keeping Unit, a unique identifier for each product in your inventory. SKUs help track sales, inventory, and performance. Sellers use SKUs to manage products efficiently.; e.g. SKU B07X lost 12% margin last month due to high return rate.
Settlement: The process of transferring funds from a marketplace or payment processor to your bank account. Settlement periods vary by platform and payment method, typically ranging from 3 to 14 days.; e.g. Amazon settles funds to your account every 14 days, minus any fees or chargebacks.
Storage Fee: A fee charged for storing your inventory in a marketplace's fulfillment center or warehouse. Fees are typically calculated per cubic foot or unit and can vary by month and region.; e.g. We switched fulfillment in March, and our storage fees dropped from $0.65 to $0.48 per cubic foot.

U

Unit Economics: Unit economics refers to the direct revenues and costs associated with a single unit of product or service. Analyzing unit economics helps you understand the profitability of individual sales and identify areas for improvement.; e.g. If you sell a widget for $10 and it costs $6 to produce and ship, your unit economics show a $4 profit per widget.