Complete breakdown of Amazon FBA feeswritten on 20/2/21
For anyone taking their FBA business seriously, knowing all the costs that come in to play when selling on Amazon is essential. If you really want to squeeze every possible dollar and increase your profit margin, you need to know all the little variables that come into play when calculating the total cost of your product.
There is no question that Fulfillment By Amazon (FBA) has changed the lives of so many people. While Amazon takes care of packaging and shipping the seller is left free to invest his time and energy into things that can truly transform and scale his business. It’s beneficial for the seller and the buyer, while Amazon takes the part of the middleman connecting those two points.While it all sounds great, Amazon takes it’s cut in the form of al the different fees and costs. Since you’re not the only one selling products on Amazon, if you really want to beat your competition you need to beat them where it matters. In the accountant’s notebook.
The one who wins in the marketplace is the one who can pay the most to acquire the customer.
Keep those words in mind. If you can afford to spend the most resources to win over a limited pool of customers, you are making money while your competitors are left in the dust.But, to really know how much money can you afford to spend to acquire a customer, you need to know how much money you are spending on different Amazon costs.
Only then can you take the necessary steps to optimize your Amazon FBA business.
Fullfilement by Amazon fees
Those fees can be roughly divided into 3 categories:
- Flat fees all Amazon sellers pay
- FBA sellers fees
- Miscalenous fees
Flat fees all Amazon sellers pay
Whether you are Fulfilment by Amazon seller or Fulfilment by Merchant seller, these are the fees you are sure to pay when you are selling on Amazon.
Amazon sellers fees
There are three methods to choose from if you are selling on Amazon:
- Fulfilled by Amazon or FBA : the most popular method of selling, where you as a seller ship the products to Amazon warehouses and leave them to fulfill orders on your behalf
- Fulfilled by Merchant of FBM : In the case you’re running a really profitable business or already have a logistics set up, you can choose to ship your products directly to the customer
- Seller-fulfilled Prime : For those merchants that have the necessary logistical and financial firepower to pull it through; SFP is a method where you as a seller ship your product directly to the customer but according to Amazon Prime’s strict shipping standards. It is highly unlikely that you will ever be eligible for this method, unless you own a multimillion-dollar company, that is.
For all beginners looking to start their own business, only the FBA method makes any sense so giving a thorough-breakdown of benefits is not really needed.
Since Amazon is providing you with its warehouse, logistics and customer support choosing any other option would cost much more than it’s worth. No matter which fulfillment option you choose, there are 2 plans available to choose from for any Amazon Seller:
The individual seller option comes with no associated monthly fees, but you are paying a flat 0.99$ fee for each transaction.
Professional seller fee
If you are selling more than 40 products on Amazon it’s a no-brainer decision to chose professional seller option for your business.
The price is 39.99$ and it’s deducted from your account each month.
A referral fee can be likened to a tax that Amazon is taking based on the category of the product you are selling.
For the privilege of selling in the world’s biggest store, you must pay this fee.
Refunds are something you simply have to take into account when calculating the profit margin for your venture. Since Amazon prides its self on its customer service, refunds for customers are managed quickly, but you will be charged an additional 5$ or 20% of the refund total, whichever is lower. It’s a way to penalize sellers in case they are not providing customers with the described product as well as giving customers a painless buying experience.
FBA seller fees
When selling products on Amazon as an FBA seller you don’t have to worry about packaging, managing and delivering said products to the customers. All of the work is managed by Amazon’s fleet of vehicles, thousands of warehouses and employees.
That benefit comes at a price though and here is the breakdown.
The main fee to keep in mind is the fulfillment fee that is depended upon the size of the product package
Another fee is associated with storing your inventory in Amazon’s warehouse. There are two fees associated with it:
- Monthly storage fee
- Long-term storage fee
Monthly storage fee
If you have any inventory left at the end of the month (and you should, since you don’t want to end up unable to fulfill customer’s orders), Amazon will charge you a fee depending upon the size in square feet your inventory is occupying.
Long-term storage fee
In case your product is not moving as fast as it should and you have products for 180 days or longer, you can expect to pay a long-term fee.
Since the profitability is influenced by turn-around speed (the speed which describes how often your inventory is replaced), having products collecting dust in the warehouse is not good for anyone, including Amazon.
To give sellers an extra push, Amazon is charging $6.90 per cubic foot of inventory.
In case you have products lying in storage for over a year you will have to pay $0.15 per product.
These are the fees that you may end up not having to pay, depending upon the category you’re selling your products or other factors.
High-volume listing fee
If you end up having to pay this fee, good for you! It means you’re in the midst of creating your own huge store. Only sellers that have over 100,000 products will have to pay this fee in the amount of $0.005 per listed product.
It’s highly unlikely that you will ever have to worry about this fee.
Unplanned service fee
Not so much as a fee as more of a penalty for not following Amazon’s guidelines. Amazon requires every seller to barcode and prepare his product before shipping it to the warehouse. In case you haven’t done your homework you can expect to pay this per-item fee.
Rental book fee
A lot of time has passed since Amazon’s early days as a bookselling website, but some people still use this service. All sellers who rent books on Amazon have to pay a $5 rental book fee for each bok that they sell.
Hopefully, these fees haven’t discoured you from starting your own Amazon FBA business. Although they may seem numerous, the benefits of using Amazon heavily outweigh the incurring fees. That is the reason why so many thousands of people have found heir financial freedom selling on Amazon and it’s also a reason for you to join their ranks as well!