Understanding how to calculate Return on Investment (ROI) and find reliable suppliers is essential for building a profitable Amazon business. Follow this step-by-step guide to master both processes.

Part 1: Calculating ROI (Return on Investment)

ROI helps you evaluate the profitability of a product after all costs are considered. Here’s how to calculate it:

Step 1: Understand the ROI Formula

ROI (%)=(Net ProfitCost of Investment)×100\text{ROI (\%)} = \left( \frac{\text{Net Profit}}{\text{Cost of Investment}} \right) \times 100ROI (%)=(Cost of InvestmentNet Profit​)×100

Step 2: Gather Key Data Points

• Product Selling Price: The price at which the item will sell on Amazon.
• Cost of Product: The purchase cost from your supplier.
• Amazon Fees: Includes referral fees, FBA fees, and storage fees (if using FBA).
• Shipping Costs: Cost to ship the item to Amazon’s warehouse or directly to customers (if FBM).

Step 3: Use Amazon’s FBA Revenue Calculator

1. Find the Product ASIN:
   • Go to the product page on Amazon and copy the ASIN (found under the “Product Details” section).
2. Access the FBA Revenue Calculator:
   • Search for “Amazon FBA Revenue Calculator” in your browser or go here.
3. Input Your Data:
   • Enter the product’s selling price, cost of goods, and shipping costs.
4. Review the Results:
   • The calculator will show your estimated profit per unit after Amazon fees.

Step 4: Calculate ROI

1. Subtract the total costs (product, shipping, and Amazon fees) from the selling price to get Net Profit.
2. Divide the net profit by the Cost of Product.
3. Multiply by 100 to get the percentage ROI.
   • Example:
     • Selling Price: $20
     • Cost of Product: $5
     • Amazon Fees: $6
     • Shipping: $2
     • Net Profit: $20 – ($5 + $6 + $2) = $7
     • ROI: (75)×100=140%\left( \frac{7}{5} \right) \times 100 = 140\% (57​)×100=140%

Part 2: Finding Reliable Suppliers

Sourcing high-quality products at competitive prices is crucial for success. Here’s how to find trustworthy suppliers:

Step 1: Use Trusted Supplier Directories

1. Alibaba:
   • A global marketplace for manufacturers and wholesalers. Search for products and negotiate directly with suppliers.
   • Look for verified suppliers with high ratings and trade assurance.
2. ThomasNet:
   • Ideal for sourcing products from North American manufacturers and suppliers.
   • Perfect for sellers who want faster shipping times and high-quality standards.
3. SaleHoo:
   • A paid directory of pre-vetted suppliers, offering a wide range of products for Amazon sellers.
4. Worldwide Brands:
   • Another paid directory featuring wholesale suppliers, particularly for small businesses.

Step 2: Evaluate Supplier Credibility

1. Request Samples:
   • Order samples to check product quality and ensure they meet customer expectations.
2. Check Reviews and References:
   • Look for supplier reviews online and ask for references from other buyers.
3. Verify Certifications:
   • Ensure the supplier complies with industry standards and certifications (e.g., FDA for food products).

Step 3: Contact Suppliers

1. Prepare a professional inquiry:
   • Introduce yourself and your business.
   • Clearly state the product you’re interested in and ask for minimum order quantity (MOQ), pricing, and shipping details.
   • Example:
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     Hello [Supplier’s Name],
My name is [Your Name], and I’m the owner of [Your Business Name]. I’m interested in purchasing [Product Name] and would like to know the following:
- MOQ
- Pricing for [specific quantities]
- Shipping options and costs to [your location or Amazon FBA warehouse]
Thank you, and I look forward to your response.
Regards,
[Your Name]

2. Negotiate Terms:
   • Discuss discounts for bulk purchases, payment terms, and delivery timelines.

Step 4: Use Retail and Online Arbitrage

1. Retail Arbitrage:
   • Visit stores like Walmart, Target, and Home Depot to find discounted items that sell for higher prices on Amazon.
   • Use apps like Scoutify or Amazon Seller App to scan products and check profitability.
2. Online Arbitrage:
   • Search clearance sections of websites like Walmart.com, eBay, and Overstock.
   • Use tools like Tactical Arbitrage to automate product searches.

Step 5: Monitor and Build Supplier Relationships

1. Maintain communication with reliable suppliers for future orders.
2. Build long-term relationships to negotiate better prices and terms.

By mastering ROI calculations and sourcing strategies, you’ll have a profitable and sustainable Amazon business. Check out our next course for supplier negotiation templates and product research tools!