Amazon FBA – It’s all about inventory profitability, NOT ROI!!!
ROI is cool. It’s good to have a high ROI for the items that you sell. But ROI isn’t everything. It’s not even close to everything. Reason being … it doesn’t take into account the time you have to hold this inventory to get the stated ROI. In other words, if an item has a case quantity or minimum order quantity (MOQ) of 72 and you sell 12 per month, you have to purchase 6 months worth at at time. On average, assuming that you order right when you get to zero quantity you have 3 months worth of stock at all times. That is your investment. Your return is your monthly profit. Take your monthly profit and divide by your average inventory and you will get your monthly profitability.
As FBA sellers, we are investors. We invest our capital and get a return that is higher than what we could get investing in traditional investments. We should be measuring our returns as a percent per month. I shoot to get at least a 20% return per month on my invested capital.