Amazon has helped thousands of businesses across the world leverage the opportunities that come with the eCommerce business and also helped them expand their markets.
Sellers can not only use the Amazon platform to sell their products and increase their market share, but they can also make use of many business solutions offered by Amazon to enhance their sales numbers.
If the nitty-gritty of processing and shipping orders yourself feels overwhelming, go for the Fulfillment by Amazon (FBA) shipping method as I have explained as a benefit here.
Through FBA, you can use Amazon’s world-class fulfillment centers, customer support, and other operational tools to scale your business faster than you ever could on your own.
If you work with FBA, you’ll store your inventory in Amazon’s fulfillment centers around the world. When a customer places an order, Amazon handles packaging and shipping the product to the customer.
If you’re selling on Amazon, or you intend to go into the Amazon business, profit margins are everything. As awesome as it would be, selling on Amazon isn’t as simple as uploading an item/description and watching the money roll in.
There are various fees involved, and we will break them down for you, so you know exactly how to budget for them, and this knowledge will help you to maximize your profits.
The Different Types of Amazon Seller Fees You’ll Encounter
As said earlier, there are several fees associated with selling on Amazon, but we can generally categorise them into one of three different kinds. The FBA fulfillment fees shown below are the adjusted rates that are in effect as of February 19, 2019.
1. Fees That Have to Do With Sales
No matter if you’re a casual (i.e. individual) or serious (i.e. professional) seller, you’ll have to give Amazon a fee each time you sell a product. The amount of the fee has to do with the product’s price and category, and it ranges from 6-20%.
And just to make it even more fun, there’s also something called the Variable Closing Fee, which you would pay on media items (e.g. music, books, DVDs, consoles, software/video games, and videos). This is a flat fee of $1.35-1.80 that’s added on top of the regular selling fee.
There’s also something called the Minimum Referral Fee, and this ranges from $0-2. You won’t have to pay both, just whichever is greater of the ‘regular’ referral fee or the minimum one.
For example, if the referral fee comes out to $1.69 and the minimum referral fee is $2, you would pay the $2 (and not the two added together, only the greater amount).
2. Fees That Have to Do With the Type of Account You Have
When you first sign up as a brand new seller, you must choose between 2 plans, Professional or Individual. Sales fees are also calculated differently depending on if you’re an individual or professional seller.
If you’re an individual seller, you pay $0.99 closing fee for every item you sell on the Amazon marketplace, but you do not pay a monthly fee.
And if you’re a professional seller, it’s the opposite. You pay a $39.99 monthly fee, but no individual fees on products themselves.
Typically, the tipping point between the two types of accounts is about 40 products per month. If you usually sell less than 40, stick with an individual account until your sales increase.
But if you find yourself regularly exceeding 40 items per month, then a professional account is probably more cost-effective.
3. Fees That Have to Do With Fulfillment by Amazon (FBA)
No matter which method you choose to ship your products, there’ll be a cost involved. If you use local shipping/courier companies because you want to ship yourself, you’ll have to pay them.
And if you want Amazon to take care of the shipping process, well, there’s a cost involved with that, too.
When it comes to FBA, you’re looking at two different types of fees.
This is what Amazon charges you to pack and ship the product (and all the service stuff in between, like customer support and returns). This fee is further subcategorised into:
- Standard Sized Items: Anywhere from $2.41 for an item under a pound to $4.71 if the item is over 2lbs (plus an extra $0.38 for each pound over 2lbs)
- Oversized Items: If the item is big but weighs under a pound, you start at $8.18 and $0.38 for every extra pound over 2lbs, for medium oversize, it will be $9.44, and for large oversize, it is $73.18 and $0.79 for every extra pound over 2lbs. Furthermore, if the item is a special oversized product over 2lbs, then your fees will be $137.32 and $0.91 for ever pound over 90lbs
FBA Storage Fees
Each month, you pay Amazon a monthly inventory storage fee based on how many cubic feet your stock uses at a fulfillment centre, as well as the volume of your inventory in the facility. Just like fulfillment fees, storage fees are divided into:
- Standard Size: $0.69/cubic foot (January-September) or $2.40/cubic foot (October-December).
- Oversize: $0.48/cubic foot (January-September) or $1.20/cubic foot (October-December).
How To Use Amazon Fee Calculator To Calculate Your Amazon FBA Fee
Calculating the exact Amazon FBA fee can be extremely confusing and new sellers often drastically underestimate the true cost of Amazon fulfillment.
To help make the math easier, Amazon provides a handy FBA calculator which can be found here
To use the calculator, you must first do a search on Amazon and find an item that closely resembles what you are trying to sell. Copy and paste the product’s ASIN into the calculator to begin.
Amazon will then use the dimensions and weight of this item to help calculate your fulfillment costs.
Once you’ve chosen a similar item, enter in your selling price and product costs and hit calculate. Amazon’s calculator will then output the approximate cost of Amazon fulfillment using FBA.
To sum up, in my opinion, FBA is a must-have service for products listed on Amazon. Being able to guarantee fast shipping (that’s often free for the customer) is key to conversion on Amazon.
Using Amazon’s warehouses for your Amazon sales makes a lot of sense. Now that you know exactly how much you’ll be spending in Amazon seller fees, you’re more than equipped to set your rules for maximum profitability.
To get an accurate idea of how much profit you’ll net, use an Amazon fee calculator.
The benefits of using the Amazon Fulfillment Service for your Amazon business is enormous. Your business will run more smoothly, and you will save time and cut costs in your own workplace.
Your customers will be impressed as they will have the Amazon customer service and delivery options available to them when they buy your products.
This means you will generate more sales and improve your customer satisfaction. Most top sellers on Amazon find success with the FBA service, reporting increased sales, especially for those products that are listed on Amazon.
If you enroll in the FBA program, you can automate order fulfillment by taking advantage of Amazon’s advanced shipping and fulfillment services and earn more sales from Amazon’s coveted prime customers.
Stop packing, and start selling!