Black Friday and Cyber Monday are almost here. Walmart, Target and Costco each have their own playbooks, but today I'm talking about Amazon. If you sell there, you have two main levers to build traction during the event: increase ad spend to get more impressions, and run promotions to convert the surge of high-intent traffic. Ideally you pull both.
One promotion we love using at David Ricardo for BFCM is the Price Discount. It's also where I see brands quietly lose money.
How the Price Discount Works
Setup is simple. In Seller Central you name the discount, pick the Black Friday / Cyber Monday event option, choose your products, set the discount and enter the total number of units you want to discount.
That last field is where it gets interesting.
The Fee Nobody Does the Math On
When you run a Price Discount during a peak event like Black Friday / Cyber Monday, Amazon charges two event fees:
- Event upfront fee: $100 per campaign, charged whether you sell one unit or zero
- Event variable fee: 1.5% of sales, capped at $5,000
Both sit on top of your normal referral fee, usually 15% in most categories. The variable fee tops out at $5,000, and you only hit that cap after roughly $333,000 in discounted sales ($5,000 ÷ 1.5%). So most brands will pay the full 1.5% on every sale.
The 1.5% is predictable. The $100 is what makes or breaks you, because it gets spread across however many units you actually sell.
Let's Run the Numbers
Say your product sells for $10 on the deal. Every unit costs you $1.50 in referral fees and $0.15 for the 1.5% event fee. Now add the $100 upfront fee divided by units sold:
| Units Sold | Upfront Fee per Unit | Total Fees per Unit | % of Sale |
|---|---|---|---|
| 20 | $5.00 | $6.65 | 66.5% |
| 30 | $3.33 | $4.98 | 49.8% |
| 100 | $1.00 | $2.65 | 26.5% |
| 300 | $0.33 | $1.98 | 19.8% |
| 500 | $0.20 | $1.85 | 18.5% |
| 1,000 | $0.10 | $1.75 | 17.5% |
| 2,000 | $0.05 | $1.70 | 17.0% |
| 5,000 | $0.02 | $1.67 | 16.7% |
At 5,000 units, that's $50,000 in sales. You pay $100 upfront plus $750 in variable fees, $850 total, and the upfront fee shrinks to 2 cents a unit. Compare that to 20 units, where the same $100 costs you $5 per unit. Same fee, wildly different outcome.
As volume goes up, the $100 almost disappears and you get close to a 16.5% floor (15% referral plus 1.5%). That's before advertising, FBA fees and Amazon's holiday peak fulfillment fees, which run from October 15 through January 14. Your real cost is higher.
Where Brands Lose Money
Brands pay the $100 to join, then submit only 20 or 30 units because they're nervous about discounting inventory. At 20 units on a $10 product, the upfront fee alone eats 50% of each sale. Add the referral fee and two-thirds of your revenue is gone before you spend a dollar on ads. You paid to join the biggest traffic event of the year and then capped your own upside.
One catch: the math runs on units sold, not units submitted. If you submit 1,000 units and sell 80, you're right back in the danger zone. So don't inflate the number. Submit a quantity you can realistically sell through, and back it with ad spend so the traffic actually shows up.
Find Your Equilibrium
There's a break-even point where the upfront fee stops mattering and every extra unit gets cheaper to sell. Before you submit, know three numbers: (1) your deal price, (2) your margin after referral, FBA and peak fees, and (3) how many units you need to sell to push the $100 below what you can tolerate per unit.
Quick formula: units needed = $100 ÷ the extra cost per unit you're willing to absorb. If you can live with an extra 2% on a $10 product ($0.20), you need to sell 500 units.
Bottom Line
Price Discounts are a volume play. If you're going to pay to play, play to win: commit real inventory, support it with ads, and make the math work for you instead of against you.
Want help modeling your BFCM promo math before you submit? That's exactly what we do at David Ricardo. Reach out at getricardo.com.