The Core Equation
Selling Price − Amazon Fees − Product Cost − Prep & Freight − Returns/Refund Impact − Storage/Operational Costs = Contribution Profit
Pre-Purchase Review
Purchase Cost
Use the real supplier/manufacturer cost and confirm whether discounts, case quantities or minimum-order requirements change the effective unit cost.
Amazon Fees
Model the current applicable selling and fulfillment fees for the exact product and fulfillment method.
Freight & Inbound
Include supplier-to-prep, prep-to-Amazon, import freight or other inbound costs that are necessary for the unit to become sellable.
Prep
Include labels, polybags, bundling, inspection, cartons and prep-center charges where applicable.
Storage
Consider expected sell-through time and the cost/risk of inventory remaining in FBA longer than planned.
Returns & Refunds
Use historical behavior when available, especially for categories with meaningful return rates.
Selling-Price Stability
Do not model profitability only at today's highest price. Test a realistic downside Buy Box or market price.
Margin
Calculate contribution profit and margin after the costs required to sell the unit.
ROI
Compare expected contribution profit with the cash invested in inventory and consider how long that cash may remain tied up.
Competition
Review seller count, Amazon presence, price behavior, listing stability and the risk of a price war.
Inventory Risk
Compare purchase quantity with current stock, inbound inventory, expected velocity, lead time and reorder options.
Documentation
For wholesale and restricted-risk products, confirm supplier legitimacy and that invoices/product records are suitable for your operating and documentation needs.
Run a Downside Case
Before approving the purchase, lower the expected selling price, increase the assumed lead time or reduce expected velocity. If a modest change destroys the economics, the product may be too sensitive to normal Amazon volatility.
Do Not Review the ASIN in Isolation
Compare the purchase with other uses of inventory capital. A product with a positive margin can still be a weak order if the cash will be tied up for too long, supplier risk is high or another product has better repeatability and turnover.
After the Inventory Arrives
Replace assumptions with actual product cost, freight and prep allocations, then compare planned and actual profitability. Use that variance to improve the next purchase decision.
For a deeper explanation of the economics, read What Does It Really Cost to Sell a Product on Amazon?. For wholesale purchasing, also see What to Check Before Placing a Purchase Order.