Good ACoS, Still Losing Money? Why You Need to Calculate Per Product
Your ACoS is 18 percent, your campaigns look good, and yet very little money is left at the end of the month. That is no coincidence. ACoS only measures ad spend relative to ad sales. What a product costs you to buy and what Amazon keeps in fees is not part of it. This article uses a worked example to show why a product with a good ACoS can lose money, and how to see what is really left for each product.
ACoS tells you how much advertising a sale costs, but not whether any profit is left. What matters is the break-even ACoS for each product: the share of revenue left after product costs and Amazon fees. If your ACoS is above it, every sale loses money, no matter how good it looks. That is why Sellantica can optimize for contribution margin: the target is derived for each product from your product costs and Amazon fees, so profit is left after advertising and you do not have to maintain an ACoS by hand.
Why ACoS says nothing about your profit
ACoS is easy to read: ad spend divided by ad sales. That is exactly why it is so popular, and exactly where the problem lies. It contains only one type of cost, advertising. Yet every sale carries three blocks of cost:
- Product costs (COGS): purchasing, manufacturing, shipping to Amazon, customs.
- Amazon fees: referral fee, FBA fulfillment and storage fees.
- Advertising costs: what ACoS reflects.
Two products with the same ACoS can therefore be in very different positions. One has a large margin and can afford a lot of advertising; the other has hardly anything left before the first ad is even shown.
A worked example: the product with the "bad" ACoS wins
Two products, each with 10,000 euros in monthly revenue. To keep it simple, all revenue comes through ads. The numbers are an example, not averages.
| Product A | Product B | |
|---|---|---|
| Revenue | €10,000 | €10,000 |
| Product costs | €2,000 | €5,200 |
| Amazon fees | €3,000 | €3,800 |
| Advertising costs | €3,000 | €1,800 |
| ACoS | 30% | 18% |
| Left over (profit) | +€2,000 | -€800 |
If you only look at ACoS, you turn down the bids on Product A and praise Product B. That would be exactly backwards: Product A earns 2,000 euros, Product B costs you 800 euros every month. The more you sell of B, the bigger the loss.
Break-even ACoS: your limit for each product
The way out of this trap is a number for each product that tells you how much advertising it can afford.
Break-even ACoS = (Revenue - product costs - Amazon fees) / Revenue x 100
This is the ACoS at which a product makes neither profit nor loss. Anything below is profit, anything above is a loss.
For our example:
- Product A: (10,000 - 2,000 - 3,000) / 10,000 = 50%. The ACoS is 30%, so 20 percentage points below. Profit.
- Product B: (10,000 - 5,200 - 3,800) / 10,000 = 10%. The ACoS is 18%, so 8 percentage points above. Loss.
Product B would only have been profitable at an 18% ACoS if purchasing were cheaper or the price higher. Advertising alone cannot fix that. For the details of calculating break-even ACoS, see Calculate, Understand and Reduce Amazon ACoS.
What you take away from the calculation
Once you know where each product stands, decisions get easier:
- Expand products with plenty of room: For Product A you can put in more budget and pay higher bids as long as the ACoS stays clearly below 50%.
- Do not push products that are in the red: For Product B more budget just means more loss. Check price, purchasing and fees first, for example whether a different packaging size lowers the FBA fee.
- Set bids by product: One uniform target ACoS for the whole account fits no product properly. It would be too cautious for Product A and too generous for Product B.
- Treat launches differently on purpose: A product in its launch phase may run at a loss for a short time if you plan for it and know your limit. More in the article Amazon TACoS.
Start with your five top-selling products. If any of them has an ACoS above its break-even, you have already found the biggest lever for this month.
What to watch out for in the calculation
- Fees change: Amazon adjusts referral and FBA fees. A calculation from spring may no longer be right in autumn.
- Purchase prices fluctuate: New batches, currency swings and freight costs change your product costs. Update them regularly.
- Returns and storage fees cost extra: They are not part of ACoS and often not in a simple spreadsheet either. Include them for products with a high return rate.
- Look at a longer period: A single day or week says little. Use at least four weeks.
See what is really left for each product
Sellantica shows product P&L by ASIN, SKU and collection and can optimize for contribution margin. Try it free for 30 days.
Start freeOptimize for profit instead of tuning ACoS by hand
The calculation above is why one fixed target ACoS for the whole account does not work. You would have to set a separate value for every product, update it whenever price, purchasing or fees change, and hope it is still right.
Sellantica can optimize for contribution margin instead. You enter your product costs, Sellantica knows the Amazon fees and derives the break-even point for each advertised product. The target ACoS deliberately sits below it with a safety margin, so profit is left after advertising. When costs change, the target follows the current data, and you do not have to set an ACoS for each product by hand.
For this, Sellantica needs your product costs and current sales data. If they are missing for a product, a manually set target ACoS applies. So enter product costs for your most important products first.
How to keep track for each product
You can keep this calculation in a spreadsheet yourself: for each product, revenue, product costs, Amazon fees and advertising costs for the same period, and from those profit and break-even ACoS. That works well with a few products. As your range grows it gets tedious, because the numbers come from several reports and keep changing.
This is where a tool that brings the numbers together helps. Sellantica includes product P&L by ASIN, SKU and collection with COGS, Amazon fees and PPC costs. You see for each product whether it is profitable after all costs, and can distribute your budget accordingly instead of going by ACoS alone.
Frequently asked questions
What is a good ACoS on Amazon?
It depends on the product. An ACoS is good when it is below your product's break-even ACoS. Break-even ACoS is the share of revenue left after product costs and Amazon fees. A fixed number like 20 percent does not apply to every product.
How do I calculate break-even ACoS?
Subtract product costs and Amazon fees from the selling price and divide the remainder by the selling price. The result is the ACoS at which this product makes neither profit nor loss.
Why does my product lose money despite a low ACoS?
Usually the margin before advertising is too small. If product costs and Amazon fees already eat 90 percent of the price, even a low ACoS is enough to push you into the red.
Should I pause products with a high ACoS?
Not automatically. A high ACoS is fine for a product with a large margin, and for new launches it can be accepted on purpose. What matters is whether the product is profitable after all costs.
Do I have to set a target ACoS per product in Sellantica?
Not if you optimize for contribution margin. Sellantica derives the target for each product from product costs and Amazon fees and deliberately keeps a distance from break-even. This requires product costs and current data. Without them, a manually set target ACoS applies.
Does Sellantica show profit per product?
Yes. Sellantica includes product P&L by ASIN, SKU and collection with COGS, Amazon fees and PPC costs.
Conclusion: profit first, then ACoS
ACoS is a useful number for advertising, but not a measure of a product's success. A product with a 30% ACoS can be your best earner, a product with 18% your biggest loss-maker. So calculate per product: revenue minus product costs, Amazon fees and advertising. If you know your break-even ACoS, you know where to step on the gas and where to brake. It gets even easier when the software does it for you and optimizes for contribution margin.
Sit down this week with your five most important products and run the numbers once. It takes an hour and often shows you more than three months of ACoS reports.