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Amazon Net PPM (Pure Profit Margin) Report

Amazon’s Vendor Central Net PPM Report provides valuable ASIN-level vendor profit data. Net PPM stands for Net Pure Profit Margin and represents Amazon’s retail profit margin.

About The Report

Amazon’s Vendor Central Net PPM (Pure Profit Margin) Report provides valuable ASIN-level vendor profit data. Net PPM stands for Net Pure Profit Margin and represents Amazon’s retail profit margin. Net PPM is a critical metric to track on an ongoing basis as it has major implications to product sales velocity.

Amazon’s Net PPM within the Net PPM Report is read as a percentage and is calculated as: (Average Selling Price - Cost Price + Trade Terms) / Average Selling Price 

Trade Terms are the additional “Above-the-Line” funding dollars you provide to your vendor manager including terms for shipping allowances. 1P Sellers usually negotiate these trade terms annually then meet quarterly with their vendor manager to review Net PPM. 

While the threshold for what is considered healthy Net PPM is unique to each ASIN, general category guidelines for Net PPM are above 35% for softlines/CPG and above 40% for hardlines. The heavier your ASIN is to ship, the higher your healthy Net PPM threshold will be for that ASIN. It’s important to work with your vendor manager to understand the Net PPM thresholds they have been tasked by their leadership to achieve for your business, both in totality for your portfolio but also at the ASIN level.

Where Can This Report Be Leveraged

Media eligibility analysis - Media campaigns will automatically pause for unprofitable, low Net PPM ASINs which formally become labeled as “Ineligible ASIN”. When as ASIN becomes media ineligible it can have a detrimental effect on customer acquisition and  sales since you can no longer support it with Amazon media.
PO size investigation - The PO purchasing algorithm is trained to reduce the amount of inventory it purchases for low Net PPM ASINs so you may find yourself at high risk of being out-of-stock.
Buy Box improvements - One of two things can happen to an ASIN’s Buy Box when it falls under its healthy Net PPM threshold:
Amazon concedes the Buy Box to other 3P sellers. The item will no longer will say “Ships and Sold from Amazon” and your 1P sales will pause. Unauthorized 3P sellers can have long shipping times and large variances to MSRP or Manufacturer Suggested Retail Price which can hurt consumer perception.
Amazon continues selling the item but then demands additional trade funds to cover their profit loss. They can decide to lower PO size or completely stop buying the item if the profit discrepancy is not rectified with your vendor manager.
Organic Rank strategy - While Amazon does not overtly communicate the details of the A10 algorithm used to determine its organic page ranking, many sellers have reported that they see a high correlation to Net PPM issues and subsequently lower organic page rank. Worth noting is it takes time and effort to recoup organic rank even after Net PPM returns to health.

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