One of the most important things that you have to do before launching a product on Amazon is to calculate your potential profits. As early as the research phase, you should know your chosen product’s potential profitability. With that in mind, getting yourself familiar with the Amazon FBA fee calculator is very important to your success.
Some sellers rely too much on trying to win the Buy Box or drive sales on their products, drastically reducing their prices in the process. But when your prices are too low and you are not making enough margins, your store will have a difficult time netting a positive income. You can mitigate the costs by cutting down on your FBA fees. This is why you should always know how to use the FBA fee calculator.
After taking into account your estimated gross sales, and capital investment costs, you should always net a positive income to keep your business flowing.
Even after the product launch, you still have to constantly monitor your outgoing costs to make sure that you are making money. Many businesses don’t succeed because they fail to see the importance of this phase. We want to help you run your business like a well-oiled machine. So, in this article, we will teach you how to calculate costs and how to estimate FBA fees with the Calculator. We’ll also show you the FBA fee calculator that you can use to estimate all these fees.
What are the costs of selling on Amazon?
As a seller, it is very important to keep track of your selling costs. Knowing your costs and understanding how to cut your spending can help you increase your potential profits. Using an FBA fee calculator can help a lot in this aspect. By letting you know where to cut costs and where not to take corners, an FBA fee calculator can get your finances in check.
To help you out, below is a list containing some of the costs of selling:
Product Capital Costs
The product capital is the initial startup cost that you need to pay to purchase your items from your chosen supplier. Depending on what kind of selling model you adopt (drop shipping, reselling, arbitrage, etc) and where you get your stocks (warehouse sales, local supplier, Alibaba, etc) your product capital costs will differ. When using an FBA fee calculator, you need to enter the cost of your capital to get accurate information.
Your marketing costs cover all the other fees that you need to pay for promoting your products. This includes getting paid traffic from pay-per-click advertising (PPC), professional photographer charges, sponsored ad listings, etc.
If you are hiring a freelancer to help you create product pages, maintain your shop, and answer customer queries, you should also include that in your marketing costs. The official FBA Fee calculator that we use doesn’t take marketing costs into the equation. But when you factor in all of your business costs, then you should always include marketing fees in the mix.
Other costs that don’t fall under the first two categories fall under your variable costs. This includes your charges, returns, damaged items, storage, disposal costs, insurance, taxes, and handling cost, etc. Again, the FBA fee calculator that we use don’t take individual variable fees into the equation.
FBA Fee Calculator: What are Amazon Fees?
(Fulfillment by Amazon) is a service offered by AMZ to third-party sellers who need their help in storing, handling, and fulfilling their products. If you are using the services of AMZ to store, ship, track, and monitor your customer after-sales service, then you need to pay them. And knowing your way around the calculator can help you a lot.
As a beginner seller, “how is FBA fee calculated?” is a question that often pops up, and it’s an important one. Knowing how to calculate is very important in making sure that you are making profits with your online store.
But first, what are the charges you have to take into account?
AMZ charges an inventory storage fee for the space that your product inventory occupies in their fulfillment centers. This monthly storage cost is calculated per FBA policies and requirements.
The amount that you need to pay often depends on the size of the item and the time of the year. During peak season, storage fees might also increase. To know how much is the storage cost that you need to pay, you can refer to this monthly inventory storage fee chart.
The default Formula per product is equal to (average daily units) x (volume per unit) x (applicable rate) depending on the category of your product.
AMZ charges fulfillment fees for picking up, packing, shipping, and providing customer service for items purchased from your storefront. In your FBA fee calculator, the fulfillment fees will vary depending on your products and their vulnerability.
To determine how much is the fulfillment charges that you need to pay for your products, you need to know the category, size, and weight of your product. A shipping fee that starts at around $2.7 per item to handle and ship your product is applied every time you make a sale. This rate increases depending on the product size and category, which you can find on this Fulfillment calculator chart.
To know your product’s category and the fees you need to pay depending on its shipping dimensions, you can check this FBA pick and pack calculator chart. Just take note that additional fees will be applied to special items such as those containing lithium batteries or televisions with screens over 42 inches which might require special handling.
AMZ takes a percentage for every item sold on its website. Third-party sellers pay AMZ a percentage of the total price—including item price, shipping cost, any gift-wrapping charges—or a minimum amount, whichever is greater. These are also known as referral charges.
(Take note that these costs are different from the selling plan fees that you need to pay when you first create your account)
The number of referral charges that you need to pay depends on your product category. It might range anywhere from 6% up to 20%. To check, here is a link to the Referral Fees calculator chart.
Fees for Non-Amazon Products
If you have your website aside from AMZ and you want to use their service to help fulfill your orders, it is also possible. Under their Multi-channel fulfillment program, you can fulfill your orders from your dedicated website without having to worry about anything else.
Of course, there are also fees involved in using this service. While it might streamline your business operations, it can also take away from your profits. Read more about the Amazon Multi-channel program to give you ideas regarding pricing and other information.
Using the Amazon FBA Fee Calculator
Tracking all of your outgoing costs can be difficult (especially if you are not good with numbers). While hiring a professional bookkeeper can help you streamline your operations, many beginner sellers might not be able to afford it during the initial launch of their business.
But you don’t need to worry about it! To help estimate how much your costs and profits are, there is an FBA fee calculator to help you get started on the right track.
While there are lots of other third-party free calculators out there, the best calculator is still (obviously) the one that AMZ created themselves.
How to use the FBA Fee Calculator?
Using the calculator is as straightforward as it gets. You just need to enter information about the product that you are selling such as its dimensions and unit weight, and theywill do the rest.
Below is a step-by-step guide on how to use the FBA Fee Calculator
1. Go to the FBA Revenue Calculator
2. Enter a product’s ASIN (if there is already an existing product listing) or you can use a keyword and search for a similar product that you are selling.
3. After choosing a similar product, you can now enter the information required to calculate your FBA Fees and revenues. For this part, you only need to put information on the right-hand side of the Revenue Calculator
- Item Price – this refers to the price you want to sell your products at.
- Ship to Amazon – this refers to the cost of shipping your items to the Fulfillment center. If you are shipping multiple items, then you should average the cost. (For example, if you have 1000 items that come from China, and it costs $500 to ship all of them to your fulfillment center, then your Ship to AMZ cost will be $0.50)
- Average Inventory Units Stored – the average number of units you hold in inventory for this product.
- Cost of Product – the cost of acquiring your product per unit from your manufacturer
4. Once you have entered the required information, click Calculate.
5. They will now generate an estimate of your total revenue, FBA fees, total fulfillment costs, and other information. Using this data, you can now estimate your net profitability and net margin every time you make a sale.
If you are an FBM (Fulfillment by Merchant) seller and you want to compare your potential profits vs FBA, you can also do that by filling in the data under the “Your Fulfillment” tab of the calculator.
This is the section on the left side of the fee calculator. By adding your own FBM fulfillment costs and comparing the results with the costs, you will find out which model is more profitable for you.
The Fee calculator is a great tool that can help you make an accurate guess whether you are going to make a profit selling your products. Compare your acquisition costs and check your competitor’s prices to make sure that you can make a positive margin before even trying to sell a product. The key is to find a supplier where you can get a competitive price while also reducing your other costs such as overseas shipping.
In niches and categories where the products are already saturated, it might be difficult for you to make a profit if your competitors are already established, even if you are selling at a lower price. Weigh your opportunities and manage the possible risks of selling in a saturated category before deciding on which product to sell.
Fine-tuning and Streamlining Your FBA Business
If you want to make it big selling online, you need to make sure you are doing everything right and cutting back on unnecessary costs. To help you optimize, fine-tune and streamline your business, here are some best practices and tips that can help you:
- Stock up your inventory – getting hit by stockout (getting all of your inventories out of stock) during the most crucial times can affect your business. First of all, it takes time to replenish stocks when you are using FBA. That means that you might lose out on the sudden surge of demand because you are out of stock. Just a weekend of not having anything in stock can hit your potential sales. Not to mention, it can also affect your seller rankings because your competition is getting more sales and reviews while your inventory is empty)
- But don’t stock up too much – stocking up too much can also be costly. You’ll end up paying an absurdly high amount of storage fees if you store too many items but can’t sell them. Once you have an idea of how many items to stock during your first inventory sellout, try adding only 10-20 items on top of your usual inventory if you sold out in less than a month. This allowance will be your saving grace just in case you run into a sudden surge in demand.
- Answer customer questions on your product page – this is one of the best-kept secrets that not many sellers take advantage of. There is a high amount of search terms and queries that can lead customers to your page – and it all stems down to answering customers’ questions. Simple customer inquiries such as “does this item glow in the dark” can lead lots of people to your product page. Try to be as informative as you can when answering questions. This simple act can increase your profits by a lot.
- Ensure your product measurements are accurate – one of the best ways to save on your Amazon Fees is to ensure that your product measurements are accurate. While your product measurements are already on AMZ’s database, there are times when the dimensions listed are not accurate and you end up paying more. Double-check your product measurements and you might save a lot of money from Seller charges.
- Cut down on costs by preparing your products in advance – AMZ charges you for every little detail such as labeling, bagging, bubble wrapping, and barcode labeling. Just to give you an idea, bubble wrapping alone can cost you anywhere from $0.3 to $3 per unit! And this cost increases during peak months too. So, if you are not drop shipping straight from an overseas manufacturer and you have some products on hand, you can save some costs by doing some of the packing and bubble-wrapping yourself.
Planning your first store can be intimidating. Especially once you throw all of these FBA fees and numbers around. Thankfully, the FBA Fee Calculator can make this process much easier. If you want to succeed in selling online, you should make this important step in planning all of your costs. Estimating your fees and business costs before even choosing your product and buying your inventory will help you streamline your profit margins.
Hopefully, this article has helped you understand what the fees you need to settle are. Knowing the costs that you need to take into account when stocking up your inventory can be the difference in making a profit – so make sure to do your homework before starting.
If you need help keeping your business flowing smoothly, Zonbase can help you get started on the right track. The Zonbase software suite houses all the tools you need to make data-driven decisions and set your business up for success. Sign up for a Zonbase free trial here.