Hello! Thanks for following me on my journey to go from $0 to $5,000 per month by selling on Amazon. One thing i've learned is You need to spend money to make money. That’s Amazon’s philosophy, at least. Last year, Amazon hosted more than 100,000 sellers with $100,000 yearly sales -- this equates to billions of dollars in collected fees.
Whether you’re just learning to how to sell on Amazon or you’ve been riding the wave for a few years, these fees have a massive impact on a business’s bottom line. I’ve created a quick guide to analyze exactly what fees you’re paying and what they’re used for.
There are two basic categories of fees -- Amazon Selling Fees and Fulfillment by Amazon fees. Below, I’ll break down each set of fees and how they impact your business.
Amazon Selling Fees
There are two ways to sell on Amazon: Fulfilment by Amazon (FBA) and Fulfilment by Merchant (FBM). Using FBA, you send your inventory to Amazon and they warehouse it and ship it to your customer. With FBM, you store and ship items yourself.
The fees below are basic and apply to everyone selling on Amazon.
Monthly Subscription Fee
There are two different types of account Amazon offers it’s sellers -- an Individual plan and Professional seller plan. The individual plan is free, but sellers pay a per item fee for each unit sold. The pro plan is $39.99 a month.
Being a professional seller gives access to a number of perks:
- No per-item fee
- Ability to calculate U.S. sales and use taxes on your orders
- Access user permissions/grant access rights to other users
- Use of Amazon’s advertising platform
- Promotions, gift services, and other special listing features
- Eligibility for listing placement in the Buy Box
Items Fees
Amazon charges a $1/item for individual sellers. Professional Sellers don’t pay this.
Referral Fee
Sellers pay a referral fee for each item sold. This fee varies by category, but is generally 8% of sale price for electronics and 15% for most other categories. A complete chart can be found here (You’ll need a sellers account to access).
Shipping (FBM only)
Sellers that fulfill items themselves must pay shipping costs out of pocket. This can either be done through Seller Central, which comes directly out of your twice-monthly Amazon payout or independently, utilizing USPS, which can be cheaper in some cases. Some categories (such as books) are eligible for a shipping credit that is added back into your payout.
Fulfillment by Amazon Fees
More than 60% of sellers use Amazon’s FBA program to warehouse and ship their items. These FBA fees can be broken down into a few categories.
Fulfillment Fees
This includes the cost of picking and packing your orders, shipping and handling and customer service. These fees depend on the item classification which is based on the weight and dimensions of an item being sold. An item generally falls into one of the following categories:
- small (under 1 lb),
- large (1 lb or less),
- large (1-2 lb) or
- large (2+ lbs).
For example, an item less than 12 ounces and smaller than 15" x 12" 0.75" is considered small and incurs a flat fee of $2.41. Any items over 20 lbs are considered “oversize” and incur additional fees per pound.
A chart detailing specific fulfillment fees can be found here.
Monthly Inventory Storage Fees
Monthly inventory storage fees are based on the classification of the item (classification process mentioned above) and the month that the fee is applicable. These fees are assessed per cubic foot and are currently as follows:
- January - September
- Standard-size: $0.69 per cubic foot
- Oversize: $0.48 per cubic foot
- October - December
- Standard-size: $2.40 per cubic foot
- Oversize: $1.20 per cubic foot
Fees are typically charged between the 7th and 15th day of each month for the previous month of which the fee applies.
Long-Term Storage Fees
A monthly storage fee is charged for all units stored in an Amazon fulfillment center for more than six months. This fee is based on calendar month and daily average volume. This is a major shift from the semi-annual fees Amazon has been been charging for years. On the 15th of each month, Amazon will charge:
- $3.45 per cubic foot for items that have been warehoused for 181-365 days
- $6.90 per cubic foot for items that have been warehouse for more than a year
Minimum Long-Term Storage Fees
Amazon charges a minimum of $0.50 per unit/month for items in fulfillment centers for 365 days or more. The greater of the applicable total long-term storage fee or minimum long-term storage fee will be charged.
Removal/Destroy Fees
Amazon charges a flat $.50 fee for each inventory unit shipped back from inventory. These is no additional shipping fee. Alternatively, you can request that a unit be destroyed for $.15.
Calculating Fees
Don’t worry about calculating your fees by hand -- ProfitGuru has a nifty seller calculator that will tell you the fees for FBA or Merchant-Fulfilled items. Just search your product by ASIN, UPC then enter your selling price and hit calculate.
If you want to save time, SupplySpy’s bulk analyzer does the same in en masse. Upload your supplier file and see all those fees for all those products.
Side note: Even when using SupplySpy, you should always double check with Amazon before ordering any products. Sometimes fees fluctuate and only Amazon can give exact fees that they will charge.
Tips and tricks
Do Amazon’s fees seem overwhelming? Here are a few pointers to reduce what you pay every month.
Pay attention to Amazon’s special promotions. Amazon runs temporary discounts for certain item categories, and even specific ASINs. For example, the referral fee rate for each sale of a Grocery or Gourmet item with a total sales price of $15.00 or less are 8% instead of 15% through December 2019. These promotions are announced on your Seller Central homepage under the News section.
Keep an eye on your inventory age. Any inventory that’s been sitting longer than 6 months will get you a storage fee. Have your inventory returned to you before you lose money.You can check this under the FBA Inventory Age widget in your inventory dashboard.
Watch your product weight. Fulfillment Fees on oversize items can double and even triple versus standard-sized items. Sometimes good profit margins can overcome this, however, it’s easy to lose money without realizing it.
Thanks for reading, I hope you have found this information helpful. Be sure to regularly check my blog for updates as I’ll be sharing links, tools and other important information. Also, find us on Youtube at SupplySpy, where I’ll be sharing information and vlog updates on how my journey is going!