sometime last spring, a homeware brand watched one of its best-selling products quietly stop moving on amazon. nothing looked broken. the listing was live, the reviews were fine, stock was sitting in amazon’s warehouses, and the brand still held the buy box.
but the purchase orders got smaller, then irregular, then stopped. advertising the brand had never switched off switched itself off. sales fell by about 40% over eight weeks.
nobody from amazon called to explain, because as far as amazon was concerned nothing had happened. a number attached to that product had crossed a line, and a system did the thing it was built to do.
the number was net ppm.
net ppm is not your margin. it is amazon’s.
net ppm stands for net pure product margin. two things about it are worth getting straight before anything else.
the first is easy. it is a margin, which is revenue minus cost, written as a percentage of revenue. ordinary accounting.
the second is the part that catches people out. the margin it measures belongs to amazon. net ppm is how much money amazon makes buying a unit from you and selling it to a shopper. in that sum, you are the cost line.
this is how a brand can be growing 30% on amazon and losing amazon’s support in the same quarter. those two sentences are about two different profit numbers, and only one of them is in your own accounts.
so how does amazon actually build the number, and how low is too low?
the formula, and who controls each part of it.
the version amazon reports in retail analytics looks like this.
four inputs. each one is a lever, and three of them sit with people in your building.
that last one is worth sitting with. price erosion on any channel you do not control ends up inside a margin calculation that decides how much amazon orders from you next.
amazon does not publish the line. it still has one.
what circulates in the industry are ballparks, roughly 40 to 45% in hardlines like electronics and durables, 30 to 37% in softlines like apparel, and 27 to 35% in consumables like grocery and beauty. treat those as the shape of the thing, not the rule.
what matters more is the comparison. your vendor manager, the amazon buyer who owns your account and its terms, is not looking at your product against a published number. they are looking at it against the other products in their category, and at whether it is drifting down.
points
what two euros of price erosion takes off amazon’s margin on a €14.99 product. your cost price never moved.
when the number falls far enough, the product gets flagged internally as crap, short for can’t realise a profit. nothing dramatic happens on the screen. advertising support gets pulled, reorder quantities get throttled, the product drifts to “temporarily unavailable”, and eventually amazon suggests you sell it yourself through seller central. that homeware brand was three months into a crap-out before anyone put a name to it.
one unit, worked end to end.
say you sell a kitchen product in germany. retail price €14.99 including 19% vat, so amazon’s net revenue is €12.60. your cost price is €7.90. your annual terms give amazon 8% back on cost, worth €0.63 a unit, so its effective cost is €7.27.
| net revenue | €14.99 ÷ 1.19 | €12.60 |
| cost price | your purchase order price | €7.90 |
| contra-cogs | 8% of cost, back to amazon | −€0.63 |
| effective cost | €7.90 × 0.92 | €7.27 |
| net ppm | (12.60 − 7.27) ÷ 12.60 | 42.3% |
healthy. now a third-party seller lists the same product at €12.99 on another site, amazon matches, and net revenue drops to €10.92. nothing about your cost or your terms has changed. net ppm is now 33.4%.
to put that back where it was, your cost price would have to fall from €7.90 to €6.85. that is a 13% cut, and no vendor manager will phrase it that way. what you will hear is a request for a cost-price reduction, in a call that feels like it is about growth.
run it on your own asin.
pick the figure you do not know. it locks, so a computed number can never get typed back in as if it were real. fill in the other four and it solves as you type.
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currency
vat |
equation
net ppm = [ r − cp × (1 − contra) ] ÷ r
r = sp ÷ (1 + vat) net ppm = [ €12.60 − €7.90 × (1 − 8.0%) ] ÷ €12.60 42.3%
net ppm — solved
comfortable in most categories. watch the direction of travel, not just the level.
worked example. change any value to solve your own.
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the easiest lever is the worst one.
giving away three more points of co-op raises amazon’s net ppm immediately, and lowers your own margin by roughly the same amount. you have bought the reorder by paying for it, and next year’s terms conversation starts from the new number. it works, it just is not free, and it does not fix what caused the drop.
there is a data problem sitting underneath all of this too. the contra-cogs figure amazon reports in retail analytics is an approximation of your terms, not a sum of what was actually deducted from you. if you want a net ppm number you can argue with, rebuild the contra line from your own remittance detail and compare. the gap is often the whole conversation.
and the reporting moves. as of early 2026 the net ppm columns, contra-cogs and sales discount included, are reachable through the sales report in sourcing view rather than the dashboard most people open first.
you are being scored on someone else’s p&l.
net ppm is the profit calculation of the customer who happens to buy from you, rather than a scorecard you are being graded on. it drifts for reasons that have nothing to do with how well your product sells. a competitor’s price cut, a euro of freight, a terms change agreed two years ago and never revisited.
the brands that get caught are rarely the ones with a bad product. they are the ones who never had a number to look at, so the first signal they got was the order pattern going strange.
what we cannot tell you is exactly where your category’s line sits this quarter. amazon does not publish it and it moves. what you can do is know your own number, per product, and watch the direction of travel.
until the next one.
free asin audit.
send us your ten worst net ppm asins. we will rebuild each one from your real cost price and your actual deductions, and show you which are recoverable, which are a terms problem, and which are already in a crap-out.
30 minutes · no pitch · just the numbers