Margin benchmarks
For Amazon FBA, gross margin (before advertising) benchmarks break down roughly as follows: below 20% is thin — you have little room to absorb advertising costs, price changes, or returns without going negative; 20–35% is workable but tight, especially in advertising-heavy categories; 35–50% is healthy and gives you meaningful headroom; above 50% is excellent and typically means either a strong product-market fit, a lower-cost supply chain, or a premium pricing position that competitors haven't undermined yet.
For net margin (after advertising), the benchmarks shift down. Net margins of 10–15% are common in competitive categories. Net margins of 15–25% indicate a well-managed product with good cost control and efficient advertising. Net margins above 25% are genuinely strong for Amazon FBA and usually represent products with strong brand differentiation, low competition, or a pricing structure where organic demand is high enough to keep TACOS low. Using "net margin above 20%" as your product selection threshold filters out a large portion of marginal opportunities.
Why complete calculation matters
Margin benchmarks are meaningless if your cost calculation is incomplete. A seller who calculates gross margin using only product cost and FBA fees might show 55% — a number that looks excellent — while the same product calculated with full landed cost, storage, advertising, and returns falls to 18% net margin. The common errors are underestimating landed cost (especially freight and duty), not allocating storage fees per unit, and calculating margin on the gross revenue figure before Amazon's fees rather than on the net payout.
The most dangerous calculation error is ignoring advertising entirely when evaluating a product's economics. PPC on Amazon is effectively mandatory for most categories — organic-only rank on competitive terms requires established sales velocity that new products don't have. Any margin model that doesn't allocate advertising spend per unit is describing a hypothetical future state, not the current reality. Model your margin with a realistic TACOS assumption (10–15% is a reasonable starting assumption for most categories) from the very beginning.
Category context
Margin expectations vary meaningfully by category. Electronics and some grocery subcategories operate on thin margins by design — low-margin, high-volume. Home, kitchen, garden, and sports products often support higher margins because there's more room for differentiation and the referral fees are typically at the standard 15% rate rather than the lower rates some categories enjoy. Beauty and personal care can support strong margins when brand positioning is strong. Books, media, and commodity consumables are generally lower-margin categories.
Rather than comparing your margin to a universal average, compare it to the realistic economics of your specific category. A 22% net margin in a competitive electronics accessory category is respectable. A 22% net margin in an artisan home goods category where similar products achieve 35% suggests your cost structure or pricing needs work. The question to answer is not "is my margin good?" but "is my margin good relative to what this category supports?"
What to aim for in practice
For product selection, a useful rule of thumb is to require at least 30% gross margin (before ads) as a minimum threshold before launching. That leaves enough room for a 10–15% TACOS and still produce 15–20% net margin — a level where the product is genuinely worth operating. Products below 30% gross margin have very little cushion for anything going wrong: a price increase from your supplier, a fee adjustment from Amazon, a spike in return rate, or a competitor entering with a lower price can all push a thin-margin product into negative territory quickly.
For existing products, set a floor and enforce it. If your net margin drops below 10%, treat that as an alert requiring action — not a situation to monitor passively. The action might be renegotiating supplier pricing, reducing ad spend and accepting lower rank, raising the selling price, or discontinuing the product if the economics can't be improved. Knowing your margin targets in advance makes these decisions much faster when the situation arrives.