As an entrepreneur, one of the most important steps that you have to take before starting a business is understanding your numbers. When you are starting, paying little attention to your business costs can be detrimental. Starting an FBA business is no different. If you want to earn a lot of profit while selling on FBA, you have to familiarize yourself with the Amazon FBA fees involved. By knowing your costs and expenditures, you can safely price your products and remain profitable.
If you want to know about the different kinds of Amazon FBA fees, you are in the right place. In this article, we will break down all the different FBA costs. We will also discuss other mandatory costs that all sellers need to pay.
Selling Fees for FBA and FBM Sellers
source: jungle scout
Amazon doesn’t profit only from the people purchasing products on their websites. They profit from the sellers who are using their platform to sell their products too. With more than 10 million sellers worldwide, AMZ makes a hefty profit from all the Amazon FBA fees they take from third-party sellers.
Let’s take a look at the different costs that all sellers are required to pay. This is before we go to the different FBA Fees. Whatever fulfillment model that you decide to use, you need to pay these costs as long as you sell on AMZ.
Selling Plan Fees
To sell on AMZ, you either pay a monthly subscription or a per-item payment on every transaction. This depends on the selling plan you choose as you sign up for a seller account. There are 2 options available here: the Individual Selling Plan and the Professional Selling Plan.
If you choose the Individual Selling Plan, you have to pay $0.99 on every item you sell. AMZ deducts this after you make a sale. If you choose the Professional Selling Plan, on the other hand, you have to pay a monthly flat payment of $39.99. This is applicable no matter how many items you sell. Similarly, this monthly subscription payment is deducted from your account balance. If the available funds are not sufficient, then your credit card will be charged.
A referral fee is a kind of commission paid every time you sell a product on the Marketplace. It is deducted from your account after a sale is made.
Referral fees are a flat percentage of the total sales price, and they range from 8% to 15%, depending on the product category. In some of the categories, the referral payments are based on sales in dollars. For example, Electronics Accessories are charged 15% of the total sales price for the portion up to $100, 8% on any portion greater than $100. Amazon has a minimum referral fee that is applicable if greater than the percentage-based payment, although this isn’t the case 100% of the time.
You should know that AMZ adjusts its costs yearly. They have made changes to the referral calculation costs for 2021, which became effective on June 1, 2021. You can view the 2021 referral fee changes here.
Variable Closing Fees
AMZ charges variable closing fees for certain products. If you sell items that are in the Media Category, you need to pay this cost. This category includes items such as Books, Music, Digital Items, Software, or Video Games. The Variable closing fee costs $1.80 per item sold.
Refund Administration Fee
This happens when a customer requests a refund for an item that has already been paid for. Items that are fulfilled through FBA fall under this category. When this happens, AMZ will process the refund and refund you the referral fee paid on the item. However, they will also deduct a refund administration fee, which is usually $5 or 20% of the referral fee, whichever is lower.
Amazon FBA Fees
So, you want to start selling on AMZ, but you don’t have enough time on your hands to handle the fulfillment? Are you swamped with orders, and you need a helping hand to get things done? If that is the case, then you need to use the FBA model.
If you use FBA, Amazon will fulfill your orders for you. All you need to do is send your products to their Fulfillment Center and they will do the rest. AMZ will also store your products and make sure that they are safe until a customer purchases them. Once a customer orders your item, AMZ will be the one to pick, pack, and ship the orders for you. They will also provide post-purchase customer service after the sale. All of these services can help you lighten up your load as a seller. However, you will be charged a certain cost to cover the cost of the services provided on your behalf.
Are you interested in knowing how much it costs to use this service? Here are the different Amazon FBA fees that you have to pay:
This category of Amazon FBA Fees covers the cost of fulfilling orders for you. This includes picking, packing, and shipping your orders. It also includes post-purchase customer service as well as product returns. Fulfillment costs are determined by the size and weight of your item. They are also charged on a per-item basis.
AMZ has provided its comprehensive list of product size tiers. They also have their calculations of fulfillment payment per unit which can be accessed here.
Like the referral costs, AMZ also revises its fulfillment charge every year. This is because the cost of shipping, packaging and other things change annually. To make sure that your fulfillment fee calculations are accurate, you can find the 2021 FBA Fulfillment Changes here.
Inventory Storage Fee
This category covers the cost of having your inventory stored in AMZ’s warehouse, instead of storing them yourself. There are two kinds: monthly storage fee and long-term storage fee.
- Monthly Inventory Storage Fee: The inventory storage fee are charged monthly and determined by how much space your inventory occupies. Depending on the volume consumed by your inventory, you need to pay a certain price. The inventory volume is measured per cubic foot. This is based on the size of the product after it has been packaged properly and is deemed ready to ship. Like other fees, the monthly storage fee is deducted from your account balance.
You should note that the monthly storage fee for January to September differs from that of October to December. During peak seasons such as Black Friday and Prime Day, several changes in prices might occur. Here is an example of the variance within the monthly storage Amazon FBA fees:
- Long-term storage fee: You need to avoid having your products stored in a fulfillment center for more than 365 days. Why? Because if your products sell slowly, then you will be charged with long-term storage fees. The long-term storage fee is charged at $6.90 per cubic foot or $0.15 per unit, whichever is greater. This is another reason why you should avoid over-stocking your inventory with products.
Even after understanding the pricing tiers of Amazon FBA fees, it may be difficult to calculate these costs in real-time. Thankfully, AMZ provides an FBA Fee Calculator that you can use to get an estimate of the FBA fee you will be charged with.
Other Amazon FBA Fees
Other fees are not mandatory, however, you should note them in case you ever incur them.
- Removal order and disposal order fee: AMZ charges this fee when they return or dispose of your inventory. Remember, items that have been stored in a fulfillment center that aren’t sold within 365 days will incur penalty fees. These additional fees can eat up your profits if left unchecked.
- Returns Processing Fee: AMZ charges this fee on orders that are eligible for free return shipping
- Unplanned services fee: You need to prepare your inventory properly before shipping it to a fulfillment center. If you don’t, you will be charged an unplanned services fee.
Miscellaneous Seller Fee
All sellers, whether FBA or FBM, may have to pay some other minor fee. Here are some of them:
- High-volume listing fee: Do you have more than 100,000 products listed? If yes, then you will be required to pay a high-volume listing fee of $0.005 per item. High-volume listing fee and FBA storage costs are paid at the same time.
- Rental book service fees: If you rent textbooks, then you have to pay a $5 rental book fee. This is for each textbook that you rent. This fee is usually charged at the time of sale.
How To Reduce Your Amazon FBA Fees
FBA fees can be really expensive if you are selling products that are heavy, fragile, and take up so much space. If you don’t optimize your selling strategy, you’ll end up paying more for FBA compared to self-fulfillment.
But don’t worry. There are still ways for you to lessen your FBA Fees and reduce your operational costs. If you want to learn how to save money on AMZ fulfillment, here are some of the steps that you can follow:
Make Sure Your Dimensions Are Compact
The space that your item takes up is in the warehouse is what drives the storage fee up. So if you want to reduce your FBA Fees, the simple answer is to make sure your items’ dimension is declared right. If you can reduce the size of the box and packaging of your item, then it is in your best interest to do so. By making sure that your item dimensions are as small and compact, you can shave off some of this storage fee.
Don’t Overstock Your Items
This is one of the most common mistakes that beginners often make. Sellers think they can save more money by sending a large shipment of inventory to the warehouse. But by doing so, you are putting yourself at a risk. If you don’t sell out your inventory fast, they might incur a long-term storage penalty fee. When this happens, your hard-earned money will slowly be drained from your account because of the costs that you have to pay.
To be on the safe side, just add 25-50 items to the usual number of items that you sell in a month. This is to ensure that a sudden outpour of sales will not sell out your inventory. Doing this will help you save on unnecessary fees.
Pack Whatever You Can Accomplish
When it comes to fulfillment costs, every little thing that AMZ does for you is paid. Even the bubble wraps and packaging tapes used on your products are counted towards your total fee. To help mitigate these costs, what you can do is try to pack whatever you can accomplish. Try to pack as much as you can before sending your items to the fulfillment center.
For example, if you can do the bubble wraps, then just do it. If you do this, AMZ won’t have to charge you for this service any longer. Just make sure that you are following AMZ’s packing guidelines whenever you do this to avoid getting your items returned.
Knowing your costs before launching your product will help you price your product profitably. It will also guide you while you replenish your inventory, so you can avoid long-term storage fees.
But even if you can lower your Amazon FBA fees, the most important thing in selling online is finding a winning product. The ability to find a product that has low competition, but good profitability can be difficult. But with the help of Zonbase, this task has never been easier.
Zonbase has 13+ tools and services specializing in important AMZ tasks to help sellers make money. From keyword research and product research up to listing optimization, Zonbase uses accurate information to make data-driven decisions.
If you want to ensure the success of your online store, finding the winning product is your priority. With Zonbase, this task can be accomplished with just a click of a button.