Selling on Amazon is a profitable venture, but it is not something you can start on a whim. Like every other business, it takes a lot of planning and effort because there’s so much work involved in building a successful business. You’ll have to research profitable products, generate relevant keywords, optimize your listings, and everything else. Of course, not everyone has the time and skills necessary to pull this off. But should that deter you from starting an Amazon business? Certainly not.
With the Amazon FBA program, you can outsource your business tasks to AMZN’s expert team for a fee. If you have heard about the program, you may have considered using it. Amazon FBA fees are usually the only reason sellers hold back from signing up for the service.
In this article, we will try to break down the different Amazon FBA fees to help you make informed decisions.
General Amazon Seller Fees
These Amazon seller fees apply to both FBA (Fulfillment by Amazon) and FBM (Fulfillment by Merchant) sellers. So, regardless of the fulfillment model used, all sellers are required to pay these Amazon seller fees.
Selling plan fees
Amazon offers two selling plans: individual and professional. If you choose the individual selling plan, you are not required to pay a monthly subscription fee. But, you’ll need to pay $0.99 for every sale.
On the other hand, the Professional selling plan requires a subscription fee of $39.99/month. With the Professional selling plan, you also get access to features such as Amz Seller Central, APIs, third-party tools, and other perks unavailable with the Individual selling plan. You also don’t have to pay $0.99 every time you make a sale.
What is the Amazon referral fee? The referral fee is the commission you must pay every time you make a sale. This fee is separate from the $0.99/sale you have to pay if you use the individual selling plan.
Referral fees differ depending on the product category. Some products mostly range from 6–8% of the total cost, while others can go as high as 15%–45%.
Amazon FBA Fees Explained
Amazon FBA is short for Fulfillment by Amazon. It is an order fulfillment service that allows third-party sellers to outsource their business tasks to AMZN’s team. When you sign up for FBA, AMZN will handle storage, shipping, and order fulfillment on your behalf. They will also provide 24/7 customer service and manage return processing for you. The service is very beneficial, especially for sellers who have a lot of commitments and need a system that allows them to accomplish more in less time.
If you use FBA, you must pay Amazon FBA fees. These fees do not apply to sellers who opt to fulfill their orders themselves. So, if you choose FBA, you’ll have to pay Amazon FBA fees in addition to the regular seller fees. Here’s a breakdown of your fees when you sign up for the service.
On the FBA service, AMZN stores your products in its fulfillment centers until your orders are ready to be shipped. Since you’ll be taking up space in AMZN’s warehouses, paying an inventory storage fee is normal. This fee covers the storage of all your inventories in fulfillment centers.
Depending on the category and size of your products, different fees will be applied. There are two kinds of storage fees: monthly and long-term storage fees.
Monthly storage fees are charged monthly and are determined by the amount of inventory space you occupy in AMZN’s warehouse. The fee is either deducted from your account balance or added to your credit card if you do not have enough funds to cover it.
Every month, on the 15th, AMZN cleans up its inventory. During the clean-up, they keep track of any products sitting in their fulfillment centers for more than 365 days.
Sellers incur a long-term storage fee of $6.90 per cubic foot of storage used or $0.15 per unit, whichever is more, for things stored for 365 days or longer. Long-term storage fees are deducted on the same day every month and in the same way as monthly storage fees.
Whenever a customer purchases a product from your store, AMZN will pick, pack, and ship the product. This service isn’t free, so AMZN charges a reasonable fulfillment fee. The fulfillment fees will also depend on the size of your product and its category. FBA shipping fees are usually lower than regular Amazon seller shipping rates. This is because AMZN is a large firm and can negotiate favorable shipping rates to cut down on costs. Individuals, on the other hand, have to pay the standard shipping fees depending on the firm they choose to use.
Yes, you can save costs on shipping when you sign up for FBA. However, you’ll have to meet FBA shipping requirements if you want to use the program.
These fees apply to FBM and FBA fees and will only be incurred under certain circumstances. So, not every seller will have to pay the fees listed here. They include:
Media products such as books, DVDs, CDs, and Blu-ray incur a $1.80 closing fee per sale, and only vendors who specialize in selling these items are subject to these fees.
Closing fees, like referral fees, are deducted from the sale proceeds, so you don’t have to pay them in advance.
High-Volume Listing Fee
Sellers with thousands of ASINs may be charged a $0.005 per qualifying ASIN monthly flat fee. You won’t have to worry about these costs unless you have more than 100,000 products listed.
Fees for high-volume listings and FBA storage are paid simultaneously. These charges are debited from the balance in your seller account. The payment will be taken from your credit card if your account balance is depleted.
How to Calculate Amazon FBA Fees
If you use the FBA program, you must factor in the service cost when fixing product prices. If you don’t, you’ll end up making losses because the fees will eat into your profit margin. The best way to avoid this is to learn how to calculate your Amazon FBA fees. According to AMZN, the fees are calculated based on size and weight.
The fees you’ll incur will depend on what size category your product falls into. AMZN classifies products into standard-size and oversized items.
Standard Size is applied to items that match the following criteria:
- It weighs a little more than 20 pounds.
- It has a maximum length of 18 inches.
- It has a 14-inch median side.
- Its shortest side is a little more than 8 inches long.
- The totals of all items in a set are added together to form a single total.
For standard-size items that weigh about 1 lb or less and special oversize items, estimate the cost based on product weight. For other items, use either the dimensional or unit weight (whichever is higher).
Dimensional weight = Unit volume (length x width x height) ÷ 139.
Here’s a size guide from AMZN’s website.
To calculate the size+girth as shown in the table above:
- Measure the length, height, and width.
- Next, add the shortest and median sides together, then multiply by 2 to get the girth.
- Now you can add the girth and longest side.
Benefits of Amazon FBA
Signing up for FBA is not a waste of money but a great business decision. However, any business decision that isn’t free must be considered thoroughly before jumping on it. So, is Amazon FBA worth it? Here are a few benefits of the service to help you weigh your options.
Competitive Advantage: Using FBA makes you eligible to provide free same-day or two-day shipping for Prime customers. Buyers are more inclined to place an order when they don’t have to pay delivery fees. So, if you use FBA, your conversion rates are likely to increase.
Ease of expansion: Because AMZN fulfills your orders, you don’t have to worry about the logistics side of things. You may now concentrate on pushing your company to the next level. You can fulfill additional orders as they come in by storing your inventory in fulfillment centers.
Return Processing: As part of the FBA service, AMZN also manages order return processing on your behalf. This leaves you with one less thing to worry about.
Large storage space: How much inventory could you possibly store without FBA? Do you own or can you rent a warehouse? Are you capable of moving and handling that much inventory? This is where the FBA program shines. Because AMZN has warehouses all over the country that can hold your goods, you virtually have unlimited storage space—for a fee.
Disadvantages of FBA
Cost: Beginners may be unable to afford Amazon FBA fees. FBA is a beneficial service, but it is not free. Some people may not have to spend that money right now. Furthermore, this service isn’t suitable for low-cost things because fees are determined, so you’ll want to know which products you enroll in. Fortunately, you can use an Amazon FBA calculator to calculate Amazon FBA fees.
Increased Returns: FBA sellers have reported experiencing an increased return rate. This results from AMZN’s swift return policy that allows buyers to send items back easily.
Product Prep Requirements: AMZN has prepping and packaging requirements. So, before sending your products to fulfillment centers, you must ensure that they are properly packaged, labeled, and dispatched according to the FBA inventory warehousing rules. Some of the subtleties can be difficult to grasp.
The FBA program comes with its pros and cons, but the pros outweigh the cons. So, if you can afford the Amazon FBA fees, you should go for them.
Related: How to use an Amazon FBA calculator
How to Reduce Amazon FBA Fees
Only Store Selected Items in Fulfillment Centers
Do you know that storing certain items in fulfillment centers will only drag your bottom line down? The less expensive the item, the more expenses you’ll incur if you ship it through FBA.
Avoid shipping items that cost less than $15 through FBA. Inventory storage fees are based on weight and size, not price – if you have a $3 item that weighs the same as a $150 item and costs the same to fulfill, your profit margin on the $3 item will most likely take a hit.
Next, attempt to keep the number of heavy goods you keep to a minimum. You’ll have to pay more for their extra weight, and this is an extra cost that may eat into your profit margin. Unless you’re making a lot of money on those products, it might be a good idea to reconsider selling them.
Create More Product Bundles
Bundling is a great way to cut down fulfillment costs. If you sell five items, you must pay fulfillment fees on all five of them. However, if you bundle those items into a single unit, you only have to pay fees for one item, not all, because the bundle is considered one item. So, bundling the products together is a simple and inexpensive task if you want to cut down costs.
Monitor Your Inbound Performance Alerts
Amazon sends you inbound performance warnings when there are problems with your shipments. When problems develop, Amazon will charge you to resolve them, so don’t make the same mistakes again and over again, since this will result in higher fees.
Inbound performance feedback can be found in Seller Central, including specifics on what went wrong and how to avoid it in the future.
Zonbase: The Best Software Tool For Sellers
Whether you plan to use FBA or FBM, you still have to find products to sell. As a third-party seller, finding the right products to sell is essential for your success on AMZN. Choosing the right products can allow you to earn a lot of money. However, choosing the wrong ones can bring about financial loss. This is why you need a software suite that can help you find the right products to sell on AMZN.
Zonbase, with its 13+ tools for product research, sales optimization, and listing optimization, is one of the best software suites today. With Zonbase’s Zonresearch, you can filter products to find the best products to sell in each category.
Zonbase also has its own Chrome Extension tool, which allows you to dig inside AMZN’s database. With this browser extension, you can find sales and revenue data for products on AMZN. As a seller, having access to this powerful tool is significant. With Zonbase, you can make data-driven decisions and get a competitive advantage over your competitors.
If you are interested in knowing more about Zonbase, you can sign up for a free trial.
Want to save time and get better results from your business? It would help if you considered outsourcing the heavy lifting to AMZN through FBA. The service is not free, but the costs are reasonable. If you read to this point, you already have an idea of the Amazon FBA fees you’ll have to pay. Go ahead, factor in these costs when fixing your product prices, and you’ll be good to go.