PPPU

While PPM (Pure Profit Margin) expresses profitability as a percentage, PPPU shows the same concept in absolute currency terms - dollars, euros, or pounds - per unit. It helps Amazon and vendors understand the exact profit contribution per item sold, independent of sales volume or additional overheads.

How It Works:

1. Amazon purchases inventory from the vendor at a negotiated cost price (the wholesale price).
2. The product is listed and sold to customers at an average selling price (ASP).
3. The difference between ASP and cost price equals the Pure Profit Per Unit (PPPU).
4. PPPU is tracked at multiple levels - ASIN, vendor, category, or brand - within Amazon’s internal profitability dashboards.

Example Calculation:

• Average Selling Price (ASP): $40
• Average Cost per Unit: $28

PPPU=40−28=$12

Amazon earns $12 of pure profit for each unit sold before accounting for operational expenses.

Benefits for Amazon:

• Profitability clarity: Quantifies actual cash contribution per sale.
• Portfolio analysis: Helps prioritise high-profit SKUs and vendors.
• Pricing intelligence: Used in pricing models and promotional funding discussions.
• Decision support: Core metric for Retail Finance Analysts (RFA) and Vendor Managers (VM) in evaluating ASIN performance.

Benefits for Vendors:

• Visibility into Amazon’s economics: Understanding PPPU helps vendors anticipate Amazon’s pricing and margin strategies.
• Negotiation alignment: Vendors can justify pricing, trade terms, or funding by referencing PPPU thresholds.
• Profit tracking: Enables strategic assortment and cost optimisation decisions.

Challenges:

• Incomplete picture: PPPU excludes fulfilment, returns, storage, and advertising costs - it’s a pre-operational profit figure.
• Category variability: Low-priced FMCG items may have small PPPU but high sales volume; durable goods have high PPPU but lower velocity.
• Margin pressure: Persistent low PPPU may lead Amazon to request cost reductions or delist ASINs.

Why It Matters:
PPPU is one of Amazon’s core retail profitability KPIs, used alongside PPM (Pure Profit Margin) and PPV (Pure Profit Value).
Together, they form the “Pure Profit Framework”, which guides retail buying, vendor negotiations, and assortment decisions.

Example:
A vendor sells two products:

• Product A: ASP $10, Cost $8 → PPPU = $2
• Product B: ASP $40, Cost $28 → PPPU = $12
   Although Product A has higher sales volume, Product B contributes more profit per unit, making it strategically more valuable for Amazon’s portfolio.

In short:
PPPU (Pure Profit Per Unit) measures the absolute profit Amazon earns on each unit sold before operational costs - calculated asand used to assess ASIN and vendor profitability in Amazon’s retail business.