Amazon Ecommerce Strategy Built on What You Keep

US-based sellers in Amazon’s store averaged more than $250,000 in annual sales in 2023, according to Amazon. That figure is what they sold.

What they kept after referral fees, fulfillment, storage, and ads is a different number. For a brand adding the channel, it’s the number that matters.

I’ve worked as a CFO for more than 15 years. Every month, our team at CFO Expertise closes accrual books for brands selling on both Shopify and Amazon.

A lot of Amazon ecommerce strategy advice is really marketing advice about listings, images, and PPC (pay-per-click) ads. Meanwhile, deposits arrive net of fees. The channel can grow while its contribution to your profit shrinks.

What Job Should Amazon Do for Your Brand?

Amazon’s role in your business decides what margin you’ll accept from it. That role also decides how much ad spend you’ll defend.

For a Shopify-first brand, an Amazon sale is worth less than the same sale on your own site, even before fees. The customer relationship mostly stays with Amazon. You don’t build the email and SMS list that drives repeat orders on Shopify.

The demand is still hard to ignore. Digital Commerce 360 estimated Amazon’s 2024 web sales at $447.5 billion and projected $486.6 billion for 2025.

A pool that size is why founders feel they have to be there. Your Amazon plan should still sit on top of a clear strategy for your own store.

Amazon usually does one of three jobs for a Shopify brand:

The standard you hold Amazon to changes with each job:

Incremental Revenue Channel

In this role, Amazon has to earn money on its own. Every product you push should clear a contribution margin floor after ad spend, set in dollars per unit.

On a $40 product, that floor might be $6 a unit. A product that can’t clear it gets repriced, repackaged, or pulled from the channel.

I hold this job to the strictest standard of the three because profit is its whole reason to exist.

Defensive Brand Presence

Some brands sell on Amazon mainly to keep control of their listings. Once a product gains traction, resellers may list it, write their own copy, and undercut your site’s price.

Selling there yourself lets you own the listing and the price. A thinner margin is acceptable in this job if you treat the shortfall as a defense cost.

Give that cost a hard cap, the same way you’d budget for brand protection.

Discovery and Trial Channel

Plenty of shoppers start a product search on Amazon. For a newer product line, the channel puts you where those buyers already look.

Judge this job on contribution first. Then credit only the halo you can measure, such as branded search or direct traffic on your store rising alongside Amazon sales.

Revenue alone is the wrong scorecard here. A busy channel can still hand you thin units and customers you can’t reach again.

Amazon Fees That Come Out of Every Sale

Amazon takes several cuts before a deposit lands. Each one depends on your category, the product’s size and weight, and the time of year.

Amazon revises its fee schedule regularly. The exact rate for any product depends on its category and size.

Pull current numbers from Amazon’s selling fees page and Amazon’s revenue calculator. Record them per SKU (stock-keeping unit) before you set a price.

The fees that matter for margin fall into four groups:

Referral Fees

The referral fee is Amazon’s commission on each sale. The fee is a percentage of the sale price that varies by category. Some categories also carry a per-item minimum.

As a percentage, the referral fee moves with price. A discount lowers it. A price increase raises it.

Fulfillment Fees

If you use Fulfillment by Amazon (FBA), Amazon charges a per-unit fee to pick, pack, and ship each order. The fee is set by size tier and shipping weight. The fee doesn’t change with price.

A $20 product and a $60 product in the same tier pay the same fee. The cheaper item gives up a much larger share of its price.

Packaging is a real lever here. A box change that moves a product into a smaller size tier lowers the fee on every unit you ship.

Storage and Aged Inventory Fees

Amazon charges monthly storage based on the space your inventory takes up. Rates rise during the October to December peak.

Units that sit too long also pick up an aged inventory surcharge. A slow seller costs you more every month it stays in Amazon’s warehouse.

Amazon charges for removals and some returns too. Check which of those fees apply in your categories.

Advertising Spend

Advertising is the only line in the stack you choose. Sponsored ads bill per click.

For margin purposes, ads still belong in the per-unit stack. Divide total Amazon ad spend by total Amazon units sold to get your ad cost per unit.

What One Amazon Unit Keeps Compared With Your Own Store?

Contribution margin is what one unit leaves after the variable costs to make, sell, and deliver it. Contribution margin comes before fixed costs like rent, salaries, and software.

A per-unit waterfall lays out those costs line by line. Comparing the Amazon waterfall with your own store’s shows you how hard it is to push the channel.

The example uses one hypothetical $40 product sold on a Shopify store and on Amazon through FBA. COGS (cost of goods sold) is $10 a unit. The Shopify order ships from a 3PL (third-party logistics provider).

Every figure is a round assumption, so swap in your own fee schedule and costs.

Here’s how the two channels compare for that product:

To run the waterfall on your own SKU, work through these steps in order:

1. 1Start with the average selling price you actually collected after discounts and coupons.
2. 2Subtract landed COGS, which is product cost plus freight and duties to your warehouse.
3. 3Subtract the platform fee. That’s payment processing on Shopify and the referral fee on Amazon.
4. 4Subtract fulfillment. Then subtract inbound shipping and storage per unit, using last month’s storage bill divided by last month’s units.
5. 5Write down contribution before ads. You’ll need it to set your ad ceiling.
6. 6Subtract ad spend per unit, counting every unit sold, organic orders included.

In this example, the Amazon unit keeps $8.75. The same sale on the brand’s own store keeps $12.00. That’s about 27% less on Amazon.

Every buyer who would have bought on your site but ends up on Amazon costs you $3.25.

That gap drives the strategy. If Amazon reaches buyers your store never would, the $8.75 is new money. If it absorbs customers you already had, it’s a leak.

Our DTC contribution margin calculator runs the same math if you’d rather not build the spreadsheet yourself.

How Much Amazon Ad Spend a SKU Can Carry

A SKU’s ad budget ceiling comes from what it earns before ads. A target ACoS borrowed from an agency benchmark or a peer’s account can’t tell you that.

Two ratios measure Amazon ad spend:

• ●ACoS (advertising cost of sale) is ad spend divided by the sales those ads get credit for.
• ●TACoS (total advertising cost of sale) is ad spend divided by all Amazon sales, organic included.

The pre-ad margin percentage is the absolute limit. At an ACoS equal to that margin, an ad-driven sale contributes nothing.

The example Amazon SKU earns about 39% before ads. Its ceiling works out like this:

Now take a second SKU that earns 25% before ads. A 30% ACoS that works for the first product loses money on every ad-driven sale of the second.

That’s why I set ceilings per SKU or per product family.

TACoS tells you more than ACoS about what ads do to the business. If ACoS holds steady while TACoS climbs, ads are taking credit for sales you’d have gotten organically.

If TACoS falls while total Amazon sales rise, ads are building organic rank. The channel is getting cheaper to run.

Launches are the one case where I’d allow spend above the ceiling. Give that spend a fixed window and a fixed budget. Book it as an investment with an end date.

How Amazon Discounts Affect Margin on Both Channels

A lower price on Amazon can pull buyers away from your own store, where you keep more of each sale. A discount also cuts deeper into the Amazon unit than the same discount does on your site.

Amazon offers coupons, promotions, and event pricing around big sales days. Each one lands on a thinner unit.

Take the example of a $40 product at 25% off. The price drops to $30. The referral fee falls to $4.50 because it scales with price.

Fulfillment, storage, and ad spend per unit stay where they were. Contribution drops from $8.75 to about $0.25.

As I put it on LinkedIn, “A 25% discount can make an ecommerce brand look like it is growing faster. But often, the brand is only selling profit at a lower price.” On Amazon, the trade is worse because the fixed per-unit fees don’t shrink with the price.

The cross-channel effect matters just as much. If your Amazon price sits well below your site price, some of your own customers will notice. They’ll buy where it’s cheaper.

In the example, each switch costs you $3.25 in contribution. You also lose a customer you could have emailed.

A few pricing rules keep both channels in check:

• ●Set one price floor per SKU that applies on every channel.
• ●Plan Amazon promotions and site sales on the same calendar.
• ●Run the post-discount waterfall before you approve any Amazon coupon.
• ●Read Amazon’s current pricing policies in Seller Central before you move your site price above or below Amazon.

Amazon decides which offer to feature. Its own rules govern how it treats prices it considers uncompetitive.

Why FBA Inventory Ties Up Cash Months Before a Sale

Inventory you send to FBA is cash you spent months before the sale. That stock then sits in a warehouse you don’t run, paying storage every month.

The cash leaves your account in stages:

After that, the units wait. As I often tell founders, “One bad PO can lock up cash for months, even if the business is profitable.”

FBA makes that risk worse. Units parked at Amazon are hard to redirect to Shopify orders when demand shifts.

Amazon’s storage and restock recommendations are built to keep you in stock on Amazon. They don’t see your bank balance, your Shopify demand, or your next supplier payment.

Amazon can also limit how much inventory you send in. Check your current capacity in Seller Central before you plan a large shipment.

Make every restock a cash decision first and an availability decision second.

The two main restock approaches trade cash flexibility against Amazon availability:

The split matters more as you grow. My rule of thumb is that the same bad inventory call costs roughly $20,000 at $500,000 in revenue. The same call costs about $80,000 at $2 million and $200,000 at $5 million.

The mistake stays the same. The orders behind it just get bigger.

When Amazon Payouts Actually Reach Your Account?

Cash from an Amazon sale lands well after the inventory cash and ad cash have left your account.

Amazon pays sellers on its own settlement schedule. Deposits arrive net of fees and refunds. Amazon can also hold back part of your balance as a reserve.

Your Seller Central payment reports show the exact schedule and reserve terms for your account. Read them before you build a forecast.

A single restock moves through the calendar in this order:

1. 1You pay the supplier deposit, often before the units exist.
2. 2You pay the balance, freight, duties, and inbound shipping.
3. 3Amazon charges ad spend while campaigns run, before most units sell.
4. 4The units sell.
5. 5Amazon deposits the proceeds on its cycle after taking out fees, refunds, and any reserve.

“More revenue won’t fix your cash flow problem,” as I’ve written before. Growing Amazon sales by 30% means buying roughly 30% more inventory and spending more on ads. All of that happens before the larger deposits show up.

A brand can post its best Amazon quarter and still feel tighter on cash than ever.

Forecast Amazon cash on expected deposit dates rather than sale dates. Keep reserved funds separate from cash you can spend.

Our guide to ecommerce cash flow planning covers building that forecast across channels.

Want a second set of eyes on your Amazon numbers? Book a free consultation, and we’ll walk through one SKU’s margin and cash timing together.

How Amazon Sales and Fees Belong in Your Books

Booking Amazon deposits as revenue hides how big the channel really is. That booking also hides how much Amazon takes.

Picture a $65,000 deposit booked as sales. Behind it might sit $100,000 of gross Amazon sales. Referral fees, FBA fees, storage, refunds, and other deductions took $35,000 before the payout.

Your books would show a $65,000 channel with no visible fees. Every margin decision built on that number would start from the wrong place.

Our team sets up Amazon in the books this way:

1. 1Record gross Amazon sales on their own revenue line, separate from Shopify.
2. 2Record refunds and returns on their own line.
3. 3Record referral fees, FBA fulfillment fees, storage fees, and Amazon advertising on separate expense lines.
4. 4Reconcile each settlement report so that sales, minus every fee and reserve, ties to the deposit.
5. 5Keep the books on accrual. Record sales in the month they happen, even when the settlement lands the next month.

Done this way, Amazon gets its own column in your profit and loss statement. You can read its contribution every month.

If your accounts can’t support that yet, start from the ecommerce chart of accounts structure we use.

Treat this as general bookkeeping education. The right treatment depends on your facts, so confirm it with your CPA.

Sales tax on marketplace orders raises its own questions. Our team doesn’t do tax work. When it’s time to file, EcomBalance, our sister company, handles that through its CPA-led ecommerce tax services.

Amazon Metrics That Show Whether the Channel Pays

Six numbers tell you whether Amazon is earning its place. Each one should drive a specific decision:

How Amazon’s Role Changes as Revenue Grows

The right role for Amazon shifts as the brand grows. So does the margin you should demand from it.

These net margin benchmarks are my own heuristics. Your category and business model will move them.

Here’s what I’d consider healthy whole-brand net margin at each revenue stage:

As Amazon’s share of revenue climbs, so does your exposure to decisions you don’t control. A fee change, a policy update, a suppressed listing, or an account problem can each hit hard.

A channel worth 15% of revenue can absorb a bad month. At 50%, the same month hits the whole business.

The Amazon plan looks different at each stage:

Brands Under $1M

At this size, I’d keep Amazon narrow. Pick two or three SKUs with the healthiest waterfall. Prove they clear your contribution floor after ads before you add more.

Every extra SKU at FBA is cash sitting in storage that you can’t spare yet.

Brands From $1M to $10M

Many of the founders I talk with sit in this band. Here, Amazon needs a channel-level view.

Give it its own column in the books, a TACoS ceiling per product family, and a monthly review of contribution after ads. Make price and inventory calls with both channels’ numbers in front of you.

Brands Above $10M

At this size, the questions shift to concentration and working capital. Decide how inventory splits across FBA, your 3PL, and any wholesale accounts.

Then compare contribution dollars per dollar of average inventory on each channel. If Amazon holds a bigger share of your inventory than its share of contribution, it’s using more working capital than it earns.

Signs Your Amazon Finances Need a CFO

Founder-run spreadsheets carry many brands through their first Amazon years. These signs show the channel has outgrown them:

• ●Amazon deposits never reconcile to Amazon sales, month after month.
• ●Nobody can say what the channel contributes after ad spend.
• ●FBA inventory keeps growing as a share of working capital.
• ●Pricing and promotions get decided channel by channel, without a combined view of what each sale keeps.

When we take on an Amazon brand, our team closes accrual books by the 10th of the month. Amazon sits on its own lines.

We build per-SKU contribution after fees and ads. We set ad ceilings from pre-ad margin and forecast cash on deposit dates.

You see Amazon and Shopify in one view. A pricing or restock call on one channel then accounts for the other.

If that’s the gap you’re feeling, here’s how our Amazon CFO services work.

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Frequently Asked Questions (FAQs)

These are the questions founders ask me most when Amazon starts to matter.

Conclusion

A strong Amazon ecommerce strategy starts with the unit. Map the fees and run the waterfall. Then set the channel’s job, its ad ceiling, and a cash plan built around when deposits land.

Before the month ends, run the waterfall on your top Amazon SKU. Compare it with the same sale on your own store.

That comparison shows whether Amazon is adding to the brand or quietly borrowing from it.

Mike Lee of Soul CBD said our work shows founders which levers to pull, where in the business to put money, and the reasoning behind each move.

If you’d like that view of your Amazon channel, book a free consultation.