As an online seller, it is important to always check and balance all of your selling costs. It might seem like you are making lots of sales, but are you just breaking even with all of your expenditures? Being familiar with an Amazon fees calculator is one of the admin tasks that you need to take upon yourself.
As you start selling more products in the marketplace, getting all of the expenditures in check starts to become difficult. Without the right system in place, staying on top of all these numbers can easily get any newbie seller confused.
Before you even start selling your first product in your store, checking an Amazon fees fba calculator is something that you should do. To be profitable, it is important to make sure that all of your costs do not eat up the sales profits that you are making.
During the initial product research phase, you should already have an idea about your selling costs to reduce what can be reduced. That way, you will be able to have a much more profitable business in the long run.
Want to learn more about using a fba calculator to check your selling costs for free even before launching your product? Then read this article to find out.
The importance of understanding your costs
Your true profits aren’t reflected in the number of sales that you make. In reality, you have lots of other factors to think about to truly estimate your net profits. Before you even launch your product, you should already be asking yourself: how much will it cost me to sell this item on Amazon? This is the reason why getting familiar with an amazon fba calculator is a must before even starting your business.
Taking into account your initial investment costs and other factors such as your warehouse rental expenses, employee salaries, etc, you should have a firm idea of how much you need to add up to your margins to be profitable.
Many beginner sellers on Amazon lose a lot of money because they don’t make the pre-emptive exercise of understanding their selling costs. They think that by selling more products, they are making more. However, that is far from the actual truth. When it comes to making profits, you have to factor in lots of things such as FBA (fulfillment by Amazon) costs if you truly want to be at the forefront of your profit generation.
There are three main categories of selling costs on AMZ. To help you understand each one of them below is a short yet informative section discussing details about these costs.
Initial upfront costs
Your initial upfront costs are composed of items that you need to pay for to start your business. Without this, running your business won’t be possible at all. The upfront costs include the cost of your products, costs of shipping price, possible import fees, warehouse fees, manufacturer’s fees, and so on.
The variable closing fee is composed of the other costs that you need to pay while your business is already running. In a way, think of it as a “maintenance fee” that you need to constantly pay to keep the business running properly. The variable fees might include Amazon FBA fees, storage fees, listing fees, return and refund fees, and so on. If you are hiring employees to help you run your business, you should also include their salaries in your variable fees.
Promotional and Marketing Costs
During running your online business, you need to run marketing campaigns and promotional materials to create buzz around your product. Marketing is important for online businesses because it attracts traffic from customers all over the world. Promotional and marketing fees include PPC (pay-per-click) advertising fees, product photography, press releases, paid articles, and so on.
Other fees that don’t fall into the other 3 categories often fall into your “other fees”. They might seem insignificant, but it is very important that you also pay attention to these fees. These include disposal costs, wrapping materials, re-shipping costs, employee parties, and other minor fees that you can think of that do not fall under the other categories.
What Is Amazon FBA?
Getting yourself familiar with the Amazon Fees is not enough. When you are selling on AMZ, you have two options regarding how you want to fulfill the orders of your customers. First, you have the FBM which means Fulfillment by Merchant. Under this fulfillment model, you are the one who does all of the fulfillment methods for your customers. When a customer makes an order, you are the one who picks, packs, wraps, and ships your order to your customer. Most sellers in any online platform often do this method in fulfilling customer orders.
On the other hand, AMZ also offers another way to help you fulfill your customers’ orders without doing it yourself. This method, also known as FBA, is one of the most unique services offered by AMZ.
Under the FBA, you have the choice to use AMZ’s resources, network, and logistics to fulfill the orders of your customers. All you have to do is send your inventory straight to AMZ’s warehouse and let them do the rest. Whenever a customer places an order, AMZ employees pick, pack, wrap, and ship the products to your customers. They will also handle all the post-purchase customer service, which means you don’t have to worry about refunds and returns anymore.
FBA is a great tool that sellers can utilize to help them become much more efficient in their fulfillment. During shopping holidays, having a helping hand can become a lifesaver as a seller. However, there are also disadvantages to using this service.
Below are some pros and cons of using the FBA service:
Advantages of FBA
Fast and reliable fulfillment – by leveraging the power of AMZ’s shipping network and logistics, you can fulfill lots of orders quickly and reliably. Customers will love shopping in your store if they can get their products faster and in good condition.
Leverage Trust Rating – When people look at your listing and they see the “Fulfilled by Amazon” badge, they are much more likely to trust your store. Because customers are loyal to AMZ, they won’t have a problem ordering from a store that is fulfilled by AMZ itself. This is an underrated but very important factor in using FBA.
Increased Conversion rates – When customers see that their orders are going to be fulfilled by AMZ, the conversion rates shoot up. Aside from that, seeing fast shipping times can also increase your conversion rates, as well as get customers to see your “Fulfilled by Amazon” badge.
More Time For Yourself – Ultimately, the biggest advantage of having FBA is getting more time for yourself. Unlike the other factors we have discussed above, time is something that you cannot buy. Time is so valuable as a seller that it has no price. With more time on your hands, you can focus on doing other things that you need to do to improve your business. This includes understanding how to use the FBA calculator to lessen your business costs.
Disadvantages of FBA
It’s not Free – All great things have a price. And when it comes to using FBA, the price can be rather steep. All of the services offered in FBA have a corresponding monetary equivalent, even to the smallest details such as using bubble wraps and boxes for your shipments. As such, it is a great practice that you pre-wrap or pre-package your items in advance before sending them to the AMZ warehouse to cut your costs.
Can increase your return rates – One of the biggest selling points of FBA is great customer service. However, this can also be detrimental. Because customers know that they can return their items if they don’t like them, as long as it still falls under the time allowed, they might exercise this feature and abuse the system.
Customers who have buyer’s remorse can easily return the item and AMZ will allow it, thus increasing your return rates. And because of this, your costs might even climb up higher due to repacking and reselling the items as “refurbished” with a lower price.
You have to constantly monitor inventory – when you send your inventory over to AMZ’s fulfillment centers, it takes a few days for your items to arrive and get sorted out. Thus, you always have to monitor your stocks to send your inventory in advance. One of the worst things to happen to you as a seller is running out of inventory on AMZ FBA, so you need to constantly be on the lookout for your stock numbers.
Amazon Fees Calculator: What are the different costs of selling on FBA?
There are several different FBA fees that you need to take note of as a third-party seller on this platform. You need to be aware of them, as well as how to utilize the Amazon FBA calculator if you want to be in charge of your expenditures.
Here are some of these fees that you need to take note of:
AMZ will charge a monthly storage fee for the space that your products occupy in their warehouses. This fee is calculated as per FBA policies and requirements. The storage fee you need to pay will depend on the category of your item, its size, and the time of the year when your item is stored. During peak seasons such as December, storage fees can increase. To learn how much is the storage cost to pay, most sellers use this monthly inventory storage fee chart. This is a simple Amazon FBA calculator chart that can help you determine your monthly storage payment.
If your products are stored inside the AMZ warehouse for more than 365 days and they remain unsold, you will also get charged an additional fee called the “long-term storage fee”. This fee is different from the monthly storage fee. So if you don’t want to get charged this fee, make sure not to overstock your warehouse with items that you cannot sell quickly.
As we have mentioned earlier, fulfillment fees cover the fees for the picking, sorting, packing, and shipping of your customer’s orders. The provision of after-sales customer service is also included in these fulfillment fees.
Your fulfillment costs will depend on the size, category inclusion, and weight of your product. Below is a brief overview of the FBA fulfillment fees, but you can view a more detailed version here.
Third-party sellers are required to pay a percentage of their item’s total price whenever they make a sale. These fees, also known as referral fees, totally depend on the shipping price, item price, and category of the item you are selling. The referral fee can range from anywhere between 5 to 20% depending on the product size, category, and other determining factors.
Check out the current Amazon referral fees for any category.
It’s not easy to be a third-party seller on one of the most competitive online marketplaces in the world. There are so many fees that you need to be aware of to make sure that your business is earning and not losing money. Having said that, knowledge of the use of the Amazon FBA calculator can go a long way. If you know how to estimate your real selling costs, it will be easier for you to pinpoint where you can cut down on costs to increase your profits.
If you want to make profits by finding your next winning product on AMZ, Zonbase is a software tool that can help make this possible. Even if you have ample knowledge of using a FBA fee calculator, it won’t matter if you can’t find your winning product. Zonbase has 13+ tools and services that can help you find the next winning product for your store.