For years, Amazon vendors and manufacturers have focused heavily on revenue metrics like Shipped COGS (the value of shipped units) and Ordered Revenue (order revenue). While these metrics are insightful, they fail to address a critical question: How profitable is this growth?
Author:
In 2025, the landscape will be changing. Manufacturers are shifting their focus from chasing revenue to prioritizing profitability. By making profitability measurable and integrating it into decision-making, businesses can achieve sustainable growth.
The problem with revenue-based management
Revenue-focused metrics, like Shipped COGS and Ordered Revenue, don’t account for underlying costs. Here’s why that’s a problem:
- Overlooking Costs: Revenue growth doesn’t guarantee higher profits if rising costs outpace it.
- Limited Insights: Profitability reviews often occur quarterly at the overall business level. This broad approach fails to uncover profit trends for specific product groups, segments, or regions.
Without precise profitability insights, businesses risk unprofitable growth that can go unnoticed.
Why profitability measurement is critical:
To manage profitability effectively, manufacturers must go beyond revenue and evaluate costs thoroughly. Profit consists of two main components:
- Revenue: Often assessed using Shipped COGS.
- Costs: Divided into two categories:
- Investments: Amazon Sponsored Ads, Amazon DSP, and promotions.
- Other Costs: Penalties (chargebacks, shortages), terms and conditions, and rebates.
Breaking down cost transparency:
One of the biggest hurdles in profitability management is cost transparency. Teams often operate in silos, creating blind spots:
- Account Teams: May lack visibility into ad spending.
- Marketing Teams: Might not track penalties like shortages or price claims.
This lack of visibility can lead to situations where certain segments of the business are actively unprofitable but remain unidentified.
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The Catapult Advantage: a path to profit optimization
Catapult Analytics provides manufacturers with the tools to measure and analyze profitability at a granular level.
Here's how:
- Detailed Contribution Margin Analysis: Includes both revenue and variable costs per unit sold.
- Comprehensive Transparency: Incorporates manufacturing costs, ad spending, and penalties for an accurate profit picture.
By focusing on profit and profit margins rather than revenue alone, manufacturers can uncover areas where cost reductions improve profitability—even if revenue decreases.
How to manage profit and profit margins effectively:
When profitability becomes the core metric, manufacturers need to gain clarity on key questions:
- Evaluate changes in Shipped COGS (revenue)
- Track trends in total costs, including investments and penalties
- Analyze whether margin changes stem from higher revenue or cost reductions
- Catapult's tools also help businesses pinpoint unprofitable segments or regions, enabling strategic resource reallocation
Manufacturers can get detailed insights into the development of net profit. This allows them to determine whether profit fluctuations stem from shifts in sales or uneven changes in costs, such as investments or fees.
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This information is refreshed daily and can be drilled down to the ASIN level, helping identify loss-making activities and refine strategies as needed.
The profitability-first mindset:
Revenue alone isn’t enough for sustainable growth on Amazon. Manufacturers need to understand what truly drives profit and manage costs accordingly.
- Transparent Metrics: Create visibility at all levels, from product groups to entire markets.
- Actionable Insights: Use data to adjust strategies, cut unnecessary expenses, and focus on profitable investments.
Why profitability will matter in 2025
In a competitive Amazon marketplace, maximizing profit — not just revenue — is becoming the key to long-term success. With tools like Catapult Analytics, manufacturers have the ways to measure, manage, and optimize profitability across their business.
Remember: “What doesn’t get measured doesn’t get managed.”
Take the first step toward a profitability-first strategy with Catapult
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