Amazon Net PPM Calculator

Calculate your Amazon Net Pure Profit Margin (Net PPM) with this free online calculator. Simply enter the required data points and click calculate. You’ll get an instant overview of your Net PPM as a result.

What is your selling price excl. VAT?

What is your product cost price?

What are your total trade terms in %?

Optional: Are there any additional terms?

What is Net PPM?

The Net PPM (also referred to as Procurement Margin) is the main profitability metric that Amazon refers to when talking about a vendor’s bottom-line performance.

It considers the average selling price, cost price and trading terms (Contra-COGS) to determine the profitability of a vendor or a product.

Note that investments in Amazon Advertising, chargebacks and payment terms are not included in the Net PPM. That’s because these are variable investments that Amazon reports later in its profit and loss account.

The Net PPM formula

The Net PMM formula for a single ASIN is as follows: Net PPM = Average Selling PriceCost Price + Vendor Terms. If you want to define the Net PPM for your vendor account it’s: Net PPM = Shipped RevenuePCOGS + Vendor Terms.

How to calculate Amazon’s Net PPM?

Follow these six easy steps to calculate your Net PPM:

  1. Find out your average sales price, e.g., $15.
  2. Find out your cost price, e.g., $12.
  3. Determine your trade investment, e.g., $2.
  4. Deduct your cost price from your sales price and add your trade investment: $15 - $12 + $2 = $5.
  5. Divide the net profit by your sales price: $5 / $15 = $0.33.
  6. Express it as a percentage: $0.33 * 100 = 33.3%.

Want to calculate your Net PPM in Excel instead?

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What is a good Net PPM?

There is no single ‘good’ Net PPM, as margins will differ by industry. In other words, your benchmark depends on what products you sell and who your competitors are.

As a rule of thumb, Amazon targets a 40% Net PPM in hardlines categories and 35% in consumables categories. The closer you are to these benchmarks, the lower will be the margin pressure for Amazon.

Why is my Net PPM different from that of my Vendor Manager?

The Net PPM you track in Vendor Central will often differ from the Net PPM your Vendor Manager communicates. That’s because their Net PPM also accounts for the sales discount of a product.

A sale discount is deducted from your margin when a customer receives a discount on the price in the Buy Box. This applies to Lightning Deals, Best Deals, Spotlight Deals during Prime Day and Subscribe and Save discounts.

This sales discount component is not visible to brands in Vendor Central. And because you likely have funded the sales discount via a trade term in the first place, you should insist on negotiating on the basis of the Net PPM excluding any sales discount.

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