Analyze retailer profitability (contribution margin / net ppm)

Modified on Fri, 22 Aug at 1:55 AM

Retailer Profitability is a critical component of your Amazon business—especially when preparing for annual vendor negotiations, launching new products, addressing CRAP (Can’t Realize a Profit) suppressions, or navigating rising material and tariff costs. For more information on contribution profit see this article.

With CommerceIQ’s Reports Builder, you can easily track profitability at the SKU level using key metrics like:

Average Selling Price (ASP) = Ordered revenue / ordered units
Unit COGS = Shipped COGS / shipped units
Net PPM = (Average Selling Price – Unit COGS – Amazon Fees – Cost of Fulfillment) ÷ Average Selling Price
Estimated Cost of Fulfillment = Seller Central FBA fees for fulfillment cost
Contribution Margin = Contribution Margin = (Average Selling Price – Unit COGS – Amazon Fees – Cost of Fulfillment – Cost of Storage) ÷ Average Selling Price
Contribution Profit = Average Selling Price – Unit COGS – Amazon Fees – Cost of Fulfillment – Cost of Storage

Create a profitability analysis in CommerceIQ

Within CommerceIQ, you can create an in depth profitability analysis within reports builder in less than a minute.

Navigate to CommerceIQ → Reports Builder → Advanced
Click Create New Report and select Start from Scratch
Click Add Widget, set the Data Source to Catalog SKUs, and set the View to Table
Add the following metrics to the table: Average Selling Price, Unit COGS, Net PPM, Estimated Cost of Fulfillment, Contribution Margin, and Contribution Profit

Within this report, you can quickly identify which brands, categories, or SKUs are driving or dragging your overall profitability. By analyzing key metrics like Net PPM, Contribution Margin, and Contribution Profit, you can pinpoint where action is needed.

Use the insights to:

Highlight top-performing SKUs to double down on investment or promotion
Flag low-margin or negative-profit items that may require price or cost adjustments
Identify categories with rising fulfillment or marketing costs
Compare profitability across brands to prioritize your portfolio strategy

With this visibility, you can take targeted actions to protect and grow profitability across your Amazon business.

How to respond to profitability challenges

Once you've identified low-margin or negative-profit SKUs, use these strategies to improve contribution profit and margin:

Adjust selling price
Evaluate pricing opportunities for underpriced SKUs. Use elasticity insights or benchmark against competitors to support changes during line reviews or AVN discussions.

Reduce cost of goods sold (COGS)
Look for opportunities to renegotiate supplier contracts or shift sourcing to lower-cost materials while maintaining quality.

Minimize fulfillment and handling costs
Explore changes to product dimensions or packaging to reduce Amazon’s fulfillment fees. In many cases, small adjustments can improve margins significantly.

Create multipacks or bundles
Multipacks can improve profitability by spreading fulfillment and marketing costs across multiple units, reducing per-unit fees and increasing ASP.

Optimize marketing spend
Use your contribution margin and profit data to ensure ad spend is aligned with your profitability goals, not just top-line sales growth.

Reevaluate underperforming SKUs
For consistently unprofitable products, consider exiting low-volume SKUs or consolidating assortment to focus on higher-margin items.