Is Amazon Really Your Most Profitable Sales Channel?
For a lot of ecommerce brands, Amazon feels like gravity. You can debate it, but eventually you deal with it. It has the reach, the trust, the Prime-conditioned customer base, and usually a few resellers already listing your products whether you showed up or not.
But gravity has a cost.
The question every brand should be asking isn’t whether to be on Amazon. It’s whether Amazon sales are as profitable as they appear. Because revenue and margin are two very different conversations, and most brands are only having one of them.
Revenue Is the Easy Part
Amazon revenue shows up clean. Orders come in, reports are readable, volume is visible. It feels like growth.
The cost structure underneath it is a different story.
A direct-site order carries some predictable costs: payment processing, pick-pack-ship, customer service, returns, and if the order came from a paid channel, your media cost. That’s the list you’re probably already managing.
An Amazon order carries all of that plus a layer of marketplace-specific fees that can quietly eat through margin before you’ve done the math:
- Referral fees (often around 15% of the sale price, depending on category)
- FBA fulfillment fees, if you’re using Fulfilled by Amazon
- Storage fees
- Inbound placement and inventory-related costs
- Returns and concessions
- Amazon advertising spend
- Pricing pressure from marketplace competition
None of that makes Amazon wrong. It makes Amazon a channel that requires honest accounting.
The Referral Fee Is Just the Starting Point
Amazon’s referral fee alone, frequently around 15% for many product categories, gets deducted before you ever factor in anything else. On a $60 product, that’s $9 off the top.
Layer in FBA fulfillment (typically several dollars per order depending on size and weight, and rising – Amazon announced a U.S. FBA fulfillment fee increase plus a 3.5% fuel and logistics surcharge effective April 17, 2026), and the cost stack grows quickly.
Then add advertising. Amazon defines ACOS as ad spend divided by ad-attributed sales. If you’re running Sponsored Products at a 20% ACOS on a $60 order, that’s another $12 going back to Amazon.
A rough cost stack on that same $60 order might look like this:
- $9 referral fee
- $5–8 in FBA fulfillment-related costs
- $1–3 in storage, returns, or operational allocation
- $12 in Amazon advertising at 20% ACOS
That’s $27 to $32 consumed on a $60 order before product cost is even in the conversation. That’s not a rounding error. That’s the difference between growing revenue and growing profit.
Now Run the Same Math on Google Ads
A direct-site order generated through Google Ads has a much cleaner cost structure.
If your ROAS is 5.0, media cost is 20% of revenue. At 6.0 ROAS, it drops to 16.7%. At 8.0 ROAS, you’re at 12.5%.
At those efficiency levels, Google Ads may be delivering direct-site orders at a lower total cost than Amazon’s referral fee alone. That is before FBA, before advertising, before storage.
That’s worth pausing on. The channel most brands treat as a cost center may be more margin-efficient than the channel they treat as a revenue machine.
Your direct-site orders still carry fulfillment costs, of course. But those costs exist across your whole operation. Google Ads cost is often the primary incremental cost attached to the order — and it’s one you can measure, control, and optimize.
Shipping Thresholds Change the Calculation Further
If your brand offers free shipping above a threshold and a meaningful portion of your direct-site orders fall below it, customers may be contributing to shipping which improves your contribution margin on those orders.
Amazon customers, particularly Prime members, arrive with high fulfillment expectations built in. That convenience has real value. It also has real cost, and that cost is baked into the fee structure whether the order is profitable or not.
The Harder Question: How Much of Your Amazon Revenue Is Actually Incremental?
This is where the analysis gets uncomfortable for a lot of brands.
Some Amazon sales come from customers who genuinely wouldn’t have found you anywhere else. Those sales have real value.
But some Amazon sales come from customers who were already searching for your brand. They knew who you were. They just happened to find you or a reseller on Amazon instead of your website. In those cases, Amazon captured demand you already created, at a margin structure you didn’t choose.
That’s not a growth story. That’s a leakage story.
Brands that carry strong branded search volume on Google are especially exposed to this. If a customer types your brand name into Google and clicks through to your site, you keep the economics and the customer relationship. If that same customer searches your brand on Amazon and buys there, you still get the sale — but the margin picture changes materially.
A Better Framework for Channel Evaluation
Instead of comparing Amazon and Google Ads by revenue, compare them by contribution margin. Even a simplified model will change the conversation.
At minimum, the analysis should account for:
- Gross revenue
- Product cost
- Marketplace or referral fees
- Fulfillment and shipping costs
- Return rate by channel
- Advertising cost
- Discounting or promotional cost
- New vs. returning customer mix
- Customer data ownership
- Repeat purchase potential
| Metric | Direct Site / Google Ads | Amazon |
|---|---|---|
| Sale Price | $60 | $60 |
| Advertising cost 20% (5 ROAS) | $12 | $12 |
| Marketplace/referral fee | None | $9 (category-dependent) |
| Fulfillment cost | Variable; some customer-paid | $7.50 FBA fees + 2026 surcharge |
| Storage / Returns Allocation | – | $2 |
| Payment Processing | $1.50 (2.5%) | |
| Total Channel Cost | $13.50 | $30.50 |
| Revenue Remaining for COGS + Margin | $46.50 | $29.50 |
Your actual numbers will vary by category, fulfillment model, and advertising strategy. The point isn’t the exact figures, it’s the discipline of running the comparison at all.
Amazon Still Has a Role. The Question Is What Role.
This isn’t an argument to abandon the marketplace. Amazon can be genuinely important for discovery, for defending against resellers, for capturing Prime-committed shoppers, and for product research and review visibility.
The problem isn’t Amazon. It’s treating Amazon revenue as equal to direct-site revenue without doing the math.
For brands selling across both channels, the smartest next step is usually a simple contribution-margin analysis by channel. Once the true cost per order is on the table, the conversation shifts from which channel produces the most revenue to which channel produces the most profitable growth.
That’s a better question. And for most brands, the answer is more nuanced and more useful than the top-line numbers suggest.
