How to calculate ACoS on Amazon?

Step one, the number Amazon gives you

ACoS = ad spend ÷ advertising attributed sales × 100. It sits in your campaign manager at campaign, ad group and keyword level, and the keyword level is where the useful version lives. A healthy campaign average routinely hides a handful of keywords quietly funding the rest.

Step two, the number you have to work out yourself

Break-even ACoS is your contribution margin before advertising, expressed as a percentage of the selling price. Sell at ₹600 with ₹180 left after product cost, Amazon fees and shipping, and your break-even looks like 30 percent.

Then subtract returns, because that 30 percent assumes every order stays sold. Take the same product at a 25 percent return rate and roughly ₹160 of forward and reverse logistics per returned order, and the real break-even falls to about 16 percent.

Target ACoS is then break-even minus the net margin you want to keep. That is the number to optimise against. Not the campaign average, and not a benchmark from an article written about a different market.

Where the calculation goes wrong

Using a store-wide return rate instead of a per-ASIN one. One bad SKU hides behind nine good ones and funds its own losses.

Forgetting the Amazon referral fee, which is a percentage of the sale and belongs inside your contribution margin before you ever get to advertising.

Reading ACoS alone. A stable ACoS on flat total sales means advertising is harvesting demand you already had, which is what TACoS is for.