Why does MerchantSpring sometimes show negative profit for a product?

Seeing negative profit for a product in MerchantSpring can be surprising, especially if the product appears to be selling well. However, this typically reflects the true financial outcome of that product after all associated costs are applied.

MerchantSpring calculates product profitability using Amazon financial event data, combined with additional cost inputs where available. Because Amazon transactions include multiple fees and adjustments, it is possible for a product to generate sales but still result in negative profit.

How MerchantSpring Calculates Product Profit

Product-level profit typically includes the following components:

Revenue

• Product sale price
• Shipping revenue (if applicable)

Costs

• Amazon referral fees
• Fulfilment fees (FBA fees)
• Storage fees
• Refund costs
• Promotional discounts
• Advertising spend (when integrated)
• Cost of Goods Sold (if uploaded)

MerchantSpring aggregates these elements to calculate the final profit value.

Common Reasons Profit May Appear Negative

High Amazon Fees

Amazon marketplace fees can be significant, particularly when including:

• Referral fees
• FBA fulfilment fees
• storage charges

If a product has low margins, these costs may exceed revenue.

Advertising Spend

If advertising data is included in profitability reporting, heavy advertising investment may reduce profit temporarily.

This is common when launching products or scaling campaigns.

Refunds and Returns

Refunds directly reduce revenue while fees may still apply. If multiple refunds occur, the product may temporarily show negative profit.

Promotional Discounts

Coupons, promotional rebates, and price reductions can reduce net revenue.

Incorrect or High Cost of Goods (COGS)

If COGS values have been uploaded incorrectly or are higher than expected, profit calculations may show negative margins.

Steps to Investigate Negative Profit

1. Navigate to Reports → Product Profit
2. Select the affected product or SKU
3. Review the breakdown of:
   • Revenue
   • Amazon fees
   • Advertising costs
   • Refunds
   • COGS
4. Identify which cost category is driving the negative margin

Notes: 

• Negative profit does not necessarily indicate a reporting error.
• Temporary negative profit is common during promotional periods.
• Refund-heavy products may appear unprofitable over short timeframes.

Reviewing profitability across longer time periods often provides a more accurate picture.