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From Data to Dollars: The Ultimate Guide to SKU-Level Profitability

Understanding and optimizing profitability at the SKU (Stock Keeping Unit) level is essential for every ecommerce business. By delving into Post-Advertising Gross Profit (PAG) at a granular level, you can uncover valuable insights that drive better decision-making and enhance overall profitability. Here’s how you can achieve this, along with a free tool to streamline the process.

What is Post-Advertising Gross Profit (PAG)?

PAG is a critical metric that calculates your gross profit after accounting for the cost of goods sold (COGS), Amazon fees, and advertising expenses. This metric provides a comprehensive view of your true profitability, helping you make informed decisions about your product portfolio. For a more detailed look into the power of PAG, check out our blog article, ‘PAG: The Key to Ecommerce Success.’

Methods to Calculate SKU-Level PAG:

1. Manual Calculation:

  • List Each SKU: Record each product’s sales data, unit cost, refunds, and advertising expenses.
  • Calculate PAG: Determine the gross profit after deducting COGS, fees, and advertising costs.
  • Analyze Results: Identify high-performing products and those that need improvement. For instance, a product with a PAG of 44% is highly profitable. In comparison, one with a PAG of 12% may require discontinuation or enhancement.

2. Using Unified Transaction Reports:

  • Request a UTR: Access Amazon’s unified transaction report for a specific date range.
  • Organize Data: Use pivot tables to categorize data by SKU, including sales, fees, and other relevant metrics.
  • Calculate Profitability: Incorporate COGS to determine profitability for each SKU.

3. Automated Solutions for Efficiency:

  • Invest in Tools: Utilize tools like Seller Labs’ Data Hub to automate the tracking of SKU-level profitability.
  • Real-Time Insights: These tools provide real-time data on advertising campaigns, refund rates, and overall performance, allowing for timely adjustments.

Check out our podcast video for a visual demonstration of our CEO calculating SKU-level PAG.

Strategic Actions Based on PAG Insights

  • High PAG Products:
    • Prioritize Stock: Ensure these products remain in stock and protected from competitors.
    • Consider IP Protection: Explore patents or trademarks to secure your competitive edge.
  • Moderate PAG Products:
    • Enhance Listings: Improve product descriptions and visuals to attract more customers.
    • Refine Quality: Address any quality issues that might lead to refunds or low customer satisfaction.
    • Optimize Advertising: Adjust your advertising strategies to improve profitability.
  • Low PAG Products:
    • Improve or Discontinue: If a product consistently shows low PAG, consider improving it through quality and listing enhancements or discontinuing it to focus on more profitable items.

Free Tools to Help You Get Started

To help you streamline this process, we offer a couple of free options that allow you to calculate and analyze SKU-level PAG. 

  1. Free PAG Spreadsheet Tool – This tool is designed to simplify the manual calculation process and provide you with clear insights into your product profitability. 
  2. Free Customized Amazon Audit Tool – We collaborated with our friends at Seller Labs to bring you a customized automation audit, which generates a report with clear insights into where you’re making money as an Amazon seller or where money is leaking. Securely connect your Seller Central account in three easy steps, and then book a time to meet with Seller Accountant’s CEO for a free review of the results.

Take Action for Greater Ecommerce Success

Understanding and optimizing SKU-level profitability is crucial for maintaining a healthy and profitable ecommerce business. You can make strategic decisions that drive better financial outcomes by leveraging PAG insights. Consistent monitoring and action are vital, whether you’re manually calculating for a few products or using automated tools for an extensive catalog

Ready to elevate your ecommerce business? Our firm exclusively provides expert bookkeeping, analysis, and coaching partnerships for ecommerce sellers. We offer the expertise and resources to help you implement robust financial strategies and achieve more substantial cash flow and profitability. Contact us today to learn how we can support your journey to ecommerce success.

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