Hi there, this is Michael from Amazing FBA and welcome to Practical Hacks. If you subscribe to the philosophy that done is better than perfect, you're going to love these little hacks. Today we'll look at how to increase your Amazon seller profit margin.

Do you want to grow your business bigger and faster? A free audit of your Amazon business can help you see and avoid threats and find missed golden opportunities. I generally charge per hour, but this would be free. You can be a reseller or a brand owner. All I ask is that you're doing a few thousand dollars a month in sales already.

Just visit myamazonaudit. com, That's M Y A M A Z O N A U D I T dot com.

Hi there folks, Michael Veazey here for another episode, this one's going to be a quick one

I've got some insights from a recent audit I did for somebody who's got only one SKU, but been selling for about a year. So quite early stages. This person has got up to around two and a half thousand dollars in sales a month selling in the U S.

So here was some insights from what is not untypical situation. There were spending quite a bit on hours and ads. The first thing is that this person was not really aware of one critical metric that I recommend everyone who is new ish on Amazon or new to e-commerce which the advertising to sales ratio or the TACOS =total advertising cost of sales. That is the same as the total advertising spend divided by the total sales of any given product.

That's a useful metric by the way that predates Amazon selling by many decades. And I think it's a good one to keep an eye on across e-commerce or even retail generally.

If your profit margin and your product accounting for all your direct costs- the cost of the product and your Amazon fulfillment costs- is say 30%. Then if you're spending more than 30% of your ad revenue on advertising, you are making zero profit.

Sadly a common circumstance. If you are launching a new product line, perfectly acceptable to pay effectively for market share. If you're not however. In launch mode, then something needs to change drastically.

So. That was the starting point of this audit that we did a few days ago.

I did it personally, by the way, I didn't have my staff to it.

One of the things to look at is why that number so high, the advertising to sales ratio. One reason for that often is a low conversion rate. That is to say the out of a hundred people visiting your listing, only a handful will buy .

And it was true in this case, as I looked in the business reports, which if you go to Amazon Seller Central dashboard. You get a business reports under. Detailed sales page by ASIN. I think you need the one in this case by parent product. It says anyone product and it was about 8% unit session percentage, which is the number of units divided by the number of sessions. A session is roughly equivalent to visits to put it in simple tips.

And if that number is low, that means that every time you spend money on an ad you pay per click as the name implies for that type of marketing, PPC. And therefore, if you have to get in this case, 8% means 12 clicks before you get a sale, then you paid for those 11 other clicks without a sale. So that really drives up the advertising to sales ratio, which is a critical number. And that strips out the profits.

How to increase your Amazon Seller profit margin:
Improve your Amazon Listing Conversion Rate
Improve Star Rating
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So how do we get that conversion rate higher? Well the easiest way is to work on your reviews. In this case, they had 4.8 star average. So that wasn't probably the issue.

Lower Price
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The price could be. Lowered. That obviously can strip out your profits of course, in a different way, but there is probably a sweet spot or they can sometimes be a sweet spot. It's worth experimenting with price.

Value. Adding more valley. Can help with conversion rates. Optimization, obviously that probably needs to be actual value,