Amazon SKU Profitability Calculator

How it is calculated

SKU-level profitability is contribution per unit times units sold, less advertising attributed to that SKU, less its storage and returns, less any SKU-specific costs.

Ranked across a catalogue it produces the list that drives every restock, promotion and discontinuation decision.

The ranking should be in money rather than in percentages, because a 60% margin on 40 units a month matters less than a 25% margin on 1,200.

The same thing with real figures

Three SKUs. A: $29.99, 1,000 units, $8.55 contribution after everything, $8,550. B: $44.99, 220 units, $16.20, $3,564. C: $19.99, 380 units, $2.10, $798.

By margin percentage, C might look respectable at 10.5% and B best at 36%. By money, A generates more than twice B and eleven times C.

C consumes a purchase order, a forecast, storage, a listing to maintain and a share of attention every cycle, for $798 a month. Whether that is worth it depends on what else that attention could do.

This ranking, run quarterly, is the single most useful management report an Amazon seller can produce, and it takes one export and one pivot table.

The catch

Advertising attribution at SKU level is imprecise, and cross-SKU halo effects are real, a well-advertised hero product drives traffic that converts on others in the same brand.

SKUs that support a range can also be worth keeping at low individual profitability, particularly where they complete a size run or an accessory set that makes the hero product more attractive.

Applying it

Rank quarterly and look hard at the bottom quartile, asking what each SKU costs in attention rather than only what it earns. The answer is usually that a few of them should go.

Then reallocate the freed capital and attention to the top of the list. Concentration beats breadth in a business with a fixed cost base and a scarce management resource.

Cutting SKUs without cutting revenue

The fear that removing a SKU removes its revenue is usually overstated, because a meaningful share of that demand transfers to the remaining products. A customer who wanted the discontinued colour frequently buys another.

The way to find out is to test rather than assume: stop restocking a candidate SKU and watch whether total category revenue falls by its full amount or by less. In most catalogues it falls by considerably less.

What is freed is not only capital but forecasting effort, listing maintenance, and the cognitive space to actually manage the products that matter. Sellers who run this exercise usually find they can remove a third of their SKUs, lose under 10% of revenue, and improve net profit, because the removed third was consuming a disproportionate share of the costs that never got attributed to it.

Run the ranking on trailing three months rather than a single month, so a stockout or a promotion in one period does not misrepresent a SKU. The decisions this report drives are slow ones, and the input should be smoothed to match.

Returns are the line most often omitted from Amazon SKU profitability, and Amazon's return rates run above most direct channels because the process is deliberately frictionless. In apparel and electronics the difference between gross and net profitability on a SKU can be several points, and the returns report is available in Seller Central for exactly this purpose.