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Understanding the difference between the three different methods AZInsight can use to calculate ROI

Return on Investment (ROI) is calculated as  ROI = Net Profit / Investment. As an Amazon seller, you must choose what goes into the investment part of the equation. Below we highlight the options available to you:

Method 1: Investment = Buy Cost 

This option  does not consider any Amazon fees and the selling price in the investment and plays ZERO parts in this calculation. It doesn't matter if your product could have sold for $25.00 with $5.00 in fees or sold for $30.00 with $10.00 in fees. 

The ONLY numbers that are used with method 1 when calculating your ROI are Profit/BuyCost.

Method 2: Investment = Buy Cost + all custom costs 

This option does not consider any Amazon fees BUT accounts for any customs costs you have (such as Prep Fees, Sourcing commissions). These fees still do not take into consideration the selling price because that number is irrelevant. So, if the product buy cost is $10.00 and you have $2.00 in custom costs, your total investment is $12.00, and your profit is now $8.00 (66.67%). 

The ONLY numbers used with method 2 when calculating your ROI are Profit / (BuyCost + custom costs).

Method 3: Investment = Buy Cost + all custom costs

This option does consider Amazon fees in the calculation. For those who want to add in the fees after the sale as part of the investment. So if your product buy cost is $10.00 and $10.00 profit, this calculation adds the $10.00 in fees to the $10.00 in buy costs, meaning that the $10.00 return is 50% of the "total investment." 

👉 ROI does not take into account consideration the selling price. ROI only takes Amazon fees into account for Method 3. 

👉The other calculations (profit and Margin) are not part of the ROI calculation settings (option 1, option 2, or option 3). 

👉The only thing that you can change is the method that you use to calculate the ROI. Keeping it on Option 1 or Option 2 is how 98% of sellers will see the results they are used to seeing. 

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