A lot has been said about Amazon FBA.
To most, it’s one of the most profitable online business models to date. Due to the low barrier of entry, everybody can sign up for an account and sell products using the platform.
Best of all, they don’t have to deal with the inventory because Amazon takes care of that for you. Once a user orders your product, the platform will package, ship, and deliver their purchase to his or her doorstep. It’s like having an e-commerce business without the hassle brought by storing and fulfilling the orders yourself.
This pitch might have convinced you to jump ship and join the Amazon FBA program. However, you need to consider a factor that not all FBA business owners talk about – FBA fees.
In this post, we will:
- discuss the different FBA fees you need to prepare for
- find ways to help you cut costs, so you don’t have to pay higher fees
- teach you how to use a fee calculator so you can keep track of your business’ ongoing costs
Everything you need to know about FBA fees
In hindsight, Amazon FBA is too good to be true. People talk about how much you can earn if you sell the right product to the right audience. However, before you can even reap the benefits of your hard work, you need to understand the fees that you need to pay to sustain your FBA business. After all, the fulfillment services don’t come free.
The types of Amazon FBA fees
There are three types of FBA fees you need to worry about. By understanding and computing for your expenses before selling a product via Amazon FBA, you will learn how much profit you will make after the fact.
These cover the costs involving the packing, shipping, and delivering your items to buyers, as well as customer service and product returns. Fulfillment fees depend on the size and weight of your standard-size and oversize item. Below is the computation table of each product according to size:
Below are examples of the fulfillment fees for each product:
If you want to compute the fulfillment fees of your actual items, go to Amazon’s profitability calculator. Enter your product’s ASIN to fill out details about your fulfillment services and Amazon’s.
The tool will then compute the costs of both fulfillment services and see how much you will spend on either. The idea here is to help you save costs by choosing the more affordable fulfillment services, which hopefully would be Amazon FBA.
A quick note – you need to use the revenue calculator of the Amazon marketplace where you plan on selling your items. Below is the list of Amazon fee calculators for each marketplace according to country:
The charges covered here pertain to the costs users have to pay so they can sell items on Amazon FBA. There are two types of Amazon accounts with different Amazon FBA seller fees.
A personal Amazon account requires you to pay a per-item cost. For every item you want to sell via Amazon FBA, you must pay for each inventory at $0.99.
With a professional Amazon account, you must pay a monthly subscription of $39.99. On the upside, you are not required to pay for the per-item costs. You can sell as many items as you want as long as you pay the flat-rate monthly subscription.
On top of the seller fees, you also need to worry about referral fees and applicable minimum fees. The former is a set fraction of the total amount of product ranging between 6-45%. The latter is usually a fixed rate of $1 per transaction, but some items don’t have one. The referral and variable closing fees for each piece depend on its category.
When a customer buys your item on Amazon, the platform will take home the referral fee OR variable closing fee – whichever is higher. Below is a table of the referral and applicable minimum fees for each category:
|Categories||Referral fee percentages||Applicable minimum referral fee
(applied on a per-item basis unless otherwise noted)
|Amazon Device Accessories||45%||$1.00|
|Baby Products (excluding Baby Apparel)||15%||$1.00|
|Camera and Photo||8%||$1.00|
|Cell Phone Devices||8%||$1.00|
|Furniture & Decor||15%||$1.00|
|Home & Garden (including Pet Supplies)||15%||$1.00|
|Software & Computer/Video Games||15%||—|
|Sports (excluding Sports Collectibles)||15%||$1.00|
|Tools & Home Improvement||15%, except 12% for base equipment power tools||$1.00|
|Toys & Games||15%||$1.00|
|Unlocked Cell Phones||8%||$1.00|
|Video & DVD||15%||—|
|Video Game Consoles||8%||—|
|Categories Requiring Approval||Referral fee percentages||Applicable minimum referral fee|
|3D Printed Products||12%||—|
|Automotive & Powersports||12%, except 10% for tires and wheels products||$1.00|
|Clothing & Accessories||17%||$1.00|
|Collectible Coins||See Category Requirements for referral fees.|
|Entertainment Collectibles||See Category Requirements for referral fees.|
|Fine Art||See Category Requirements for referral fees.|
|Grocery & Gourmet Food**||15%||—|
|Health & Personal Care (including Personal Care Appliances)||15%||$1.00|
|Industrial & Scientific (including Food Service and Janitorial & Sanitation)||12%||$1.00|
|Luggage & Travel Accessories||15%||$1.00|
|Shoes, Handbags & Sunglasses||
|Sports Collectibles||See Category Requirements for referral fees.|
Click here for more information about referral and applicable minimum referral fee.
For example, if you’re selling a product under Furniture & Decor that coss $5, then Amazon will take home the minimum fee of $1 (since the referral fee for this item is $0.75).
Amazon released an update early this year about the updates they made to the Amazon FBA fees. According to their Seller Central page, the purpose is to improve inventory management in their warehouses by encouraging users to get rid of items that have overstayed their welcome. Due to the space occupied by unmovable pieces, it prevents Amazon to provide the same level of quality on all orders. Through the updates taking place this year, they can supply better efficiency in their fulfillment services.
As of 2018, below are the top changes made by Amazon:
- Increase in monthly inventory FBA storage fees – Monthly price for standard and oversized items will increase $0.05 per cubic foot. The changes took effect on April 1, 2018.
- Change of payment duration for long-term storage fees – Instead of paying on a semi-annual basis, users will have to shoulder the storage costs every month. The changes took effect on September 15, 2018.
- Minimum charge for long-term storage fees – Items that remain in the fulfillment centres for more than 365 days will incur a penalty of at least $0.5 per unit. The longer the duration of the item, the higher the costs will be. The changes took effect on September 15, 2018
- Introduction of the Inventory Performance Index – The inventory of each user will be provided a rating by Amazon. The score depends on how fast you push items out from the Amazon’s storage and warehouse. The quicker you sell them, the better your score will be. If your Inventory Performance Index drops to 350 before the start of a quarter every year, then you will incur potential storage limits which apply in the next quarter. Therefore, you won’t be able to ship new items to Amazon until your inventory level drops below your storage limits. You will be charged for Inventory Overage Fees at $10 per cubic foot for items that exceed your storage limits. The changes took effect on July 1, 2018.
Taking these updates into account, Amazon conducts an inventory cleanup on the 15th of every month. Amazon will charge you $3.45 per cubic foot for Items in fulfillment centers for 181-365 days. If you have items in fulfillment centers that exceed 365 days, the platform will charge you $6.90 per cubic foot. There is a minimum long-term storage fee that amounts to $0.5.month for items that don’t measure to a cubic foot.
You can learn examples of long-term storage fees for certain items here.
What you need to do now as Amazon FBA seller
Given the fees you need to cover above, you need to set your house in order first before you undergo Amazon FBA.
While the benefits of Amazon FBA prevail over its shortcomings, building a profitable FBA business means taking care of the various fees you must pay first. This allows you to cover your bases and focus on making money through the platform instead of worrying about how much you should spend every time you plan on adding items to your storage limit.
Therefore, to answer the question that this article posits, the Amazon FBA fees are worth their cost as long as you do take a good long look in your plan and business. Below are ways you can do it:
Clean out your inventory first
If you already have an established Amazon FBA business, it is essential to optimize your inventory, so you don’t incur penalties. Amazon will give you a heads up if you have items in their warehouses that will be prone LTSFs weeks before the fees kick in. However, they won’t be transparent as to which item they are referring to in their notice. Therefore, you need to personally check and see which items they are.
You need to identify them by logging into your Seller Central account, go to Inventory > Manage Inventory. Then, click on Inventory Dashboard, and look for the FBA Inventory Age Box at the bottom of the page.
From here, you have options on how you can get rid of the products to avoid the unnecessary fees:
- Reduce the price of the items or play the odds – Recalculate the items and come up with a much lower price for it to encourage more people to purchase them. The goal is to sell them before the penalty kicks in, so you need to move fast. However, if you’re a betting man, you could calculate the costs of incurring the penalty over a period and selling the items at a competitive price. If you need help with the repricing strategy for your items, get help from RepricerExpress. You can then run a paid ad campaign for the product if you want to show it to more people on Amazon and hopefully sell it to them.
- Request for removal – If you cannot afford to pay the long-term storage fees, request Amazon to remove the items from their warehouse. You will have to shoulder the return fees which costs $0.5 per standard-size item ($0.6 per oversize item).
- Request for disposal – If you want to cut your losses, you can ask Amazon to sell the product for you. You must pay the platform $0.15 per standard-size item ($0.3 per oversize item) to get rid of them from your warehouse. When all else fail, this option is your last resort.
Use another fee calculator
The Amazon FBA Revenue Calculator is perfect if you want to compare your current fulfillment services to Amazon’s. However, if you want you to learn more than just the fulfillment fees, you can consult third-party software like Jungle Scout’s free FBA profit calculator. Upon signing up for an account of the tool, it helps you break down the three most crucial costs in FBA: upfront, variable, and marketing costs.
Another tool you can use to compute for your Amazon fees is Viral Launch’s Amazon FBA Calculator. Enter the product’s ASIN to see the total Amazon FBA fees as well as the upfront cost for purchasing the items and the monthly profit if you sell them on Amazon. You can compare up to three items using this tool to help you determine which products yield the highest profit.
The goal is to provide you with a comprehensive view of all the costs you need to shoulder once you start selling the item on Amazon. By gathering all the data and figures, you can compute for the actual profit of the item once sold on the platform.
Always do your research before selling
Your priority is to grow your Amazon FBA business and make substantial money off it. You won’t be able to do this if the items you’re selling are complete duds. You’ll be forced to either sell them at a lower cost or remove their from the warehouse so that you can avoid the long-term storage fees.
Therefore, you need to do your research when choosing items to sell on Amazon FBA. While you can conduct your research manually, it’s best to use a tool that helps you automate the entire process. Third-party software like Jungle Scout, ASINspector, and others may be paid tools, but they provide data that you won’t be able to gather by yourself. Variables like demands, reviews, sales, and others help you come up with informed decisions about a product so you can choose the best possible product to sell.
Part of your research is finding the best keyword to optimize for your listing. People search for products on Amazon using different keywords on the search bar. If you want more users to find your product listing, then find search queries related to your product that will give you the best shot of attracting the right people to your listing and converting them into sales.
Launch your product the right way
To ensure that your items will sell, you need to properly launch your products on Amazon. The idea is to establish your product in the market first before running a paid ad campaign. By getting initial reviews and running giveaways for your Amazon product, you immediately position it above similar items in the platform. Once you’ve gathered enough reviews and given away products to generate buzz, you can now run Amazon PPC to make sales. By launching your product correctly, you’ll be able to sell them out even before the storage fees kick in.
If you need help with conducting an Amazon product launch, click here and learn the exact steps on how to do it.
Wrapping it up
Amazon FBA fees are necessary costs. To launch a successful Amazon FBA business, you need to shoulder the costs of not only the products you’re selling but also the fulfillment of those products to buyers. The fees are an intrinsic part of the business, and there’s no way around it. As the saying goes, you have to pay to play.
However, there are unnecessary fees that you need to avoid such as long-term storage fees. This reason is why you need to make sure that you’re selling a winner of a product. Doing your research by finding the right product to sell, looking for the best keywords for the item, and adequately launching them in the market is your best course of action to ensure that everything sells out.
If you follow the stuff mentioned in this post, then the FBA fees are the least of your worries. Choosing and selling the right products to grow your brand will more than make out for the hassle of paying the fees.