Amazon’s e-retail market share seems to grow every year. It doesn’t require a Harvard education to know that if you don’t have a presence in this marketplace, you’re missing out on a huge amount of new customers. You need to sell here, but with any new business venture, there will be new expenses. You might be thinking “how much does it cost to sell on Amazon?” so here’s a quick rundown on the different types of Amazon seller fees and when they are charged.
Amazon Seller Fees – Fixed & Variable Fees
Amazon Seller Central Account Types
One of the first things you’ll need when learning how to sell on Amazon is a seller’s account. There are 2 different types you can sign up for – professional or individual.
- Professional Seller Accounts are for users who will be selling more than 40 items a month and costs $39.99 monthly. You’re also charged a variable referral fee, per item sold. It varies depending on the category the product comes from. More on this later.
- Individual Seller Accounts are designed for users who plan on selling fewer than 40 items a month. A big difference is there’s no monthly subscription fee but there is a $0.99 charge per item sold plus that same variable referral fee.
You can check out Amazon’s pricing page for some of the other differences between the two accounts. If you are starting an Amazon business only the professional plan makes sense for you. This is the only fixed cost with a recurring monthly fee of $39.99. All other Amazon seller fees will be variable and depend on how many items you store, sell and refund with Amazon.
Referral fees? So what are they? They’re basically a commission that Amazon charges you for listing items on their site. Every item belongs to a category and every category has its own fee. In most cases, it’s 15% of what your customer is charged or $1 minimum. Remember that the referral fee is based on your customer’s final cost so if you offer a coupon or have a sale, the fee is a percentage of that final price. Sound complicated? Here’s an example:
Your retail price: $100
Your sale price: $90 (10% markdown)
Your customer has a 5% off coupon: $90 – $4.50 = $85.50 ($90 x 5% = $4.50) If this item belongs to a 15% referral fee category, your cost would be $12.83 ($85.50 x 15% = $12.83). If the customer pays for anything extra like wrapping, the fee applies to this cost too so it may increase. You can see Amazon’s complete fee schedule here.
Below is a snapshot of some categories and their fee percentages.
There are also variable closing fees that pertain to media products like books and video games, high volume listing fees and a refund administration fee. Let’s break those down so you can get a better understanding.
Variable Closing Fees
As mentioned above, every item on Amazon belongs to a specific category and each category has its own fee but some items have additional costs. These costs are called variable closing fees and they apply strictly to books, music, videos, DVDs, video games, consoles, and software. As you can see in the table below, it’s an extra $1.35.
High Volume Listing Fees
Back in February 2015, Amazon instituted a new High-Volume fee for those vendors with over 2 million non-media SKUs per month. That fee is $0.0005 for each SKU over that 2 million SKU mark. So for example, if you have listed 3,000,000 SKUs for a particular month, this fee would apply to 1,000,000 SKUs since this is only applied to those SKUs beyond the first 2 million. The cost for this example would be $500 since 1,000,000 x $0.0005 = $500.
If you’re one of the sellers applicable, you are fortunate to belong to the elite of the most successful sellers. As such this fee is more a privilege than a burden.
Refund Administration Fee
One of the great benefits of using FBA is having Amazon take care of your customer service needs and as with any retail business, there will be returns. If this occurs, Amazon will refund your customer their charge and refund you the amount of the referral fee you paid for minus this Refund Administration Fee. This fee is less than $5 or 20% of the applied Referral Fee. Confused? Here’s an example:
Your customer purchased a $10 item in a 15% Referral Fee category. Your Refund Administration Fee cost would be calculated as $10 x 15% = $1.50. $1.50 x 20% = $.30.
These are all fees that you have to take care of when selling with Amazon, however there is a second set of fees if you’re using Fulfillment by Amazon (FBA), which I strongly recommend. Amazon offers a broad-ranging band of services to retailers selling on their platform and in most cases they can handle it cheaper and more efficient than you could yourself as a small business. Let’s have a closer look at the FBA fees and when they are charged.
Amazon Seller Fees – Amazon FBA Fees
Fulfillment by Amazon (FBA)
One of the most attractive features of setting up an Amazon store is having them fulfill and ship your orders and not having to worry about warehousing your own products, providing your own customer service or even billing your customers. Using Amazon FBA can also translate into many more sales for you too. Items fulfilled by Amazon are profiting from a higher search visibility, increased chance to win the buy-box and utilize Amazon speedy delivery and prompt customer service to keep your seller reputation high and your customers happy and last but not least, items fulfilled by Amazon are also eligible for Amazon Prime.
As mentioned earlier, from storage to shipping and customer service support, they handle it all but only if you want them too. Of course, you can handle all this yourself but why would you? That’s what the Amazon selling fees pay for – those services and benefits.
At this point, you might be thinking nothing’s free, so what does it cost to handle all this for each order? That’s a good a question and it depends on a lot of various things but fortunately there’s a handy tool called Amazon FBA calculator, that you can use to help determine what some of those charges will be.
The Amazon FBA Calculator
The Amazon FBA calculator can be used to provide a cost comparison between having orders filled by Amazon as compared to orders being filled by you. There are various fields that represent expenses associated with fulfilling your sales such as those referral fees mentioned earlier, pick & packing costs, monthly storage fees, shipping and other charges.
Some of these costs are common to most items in a particular category. For example, there’s a $1 charge for order handling and $1.06 charge for pick & pack for non-media items. In contrast, for items in the media category, there’s no $1 order and handling charge but there’s that $1.35 variable fee that was explained earlier.
Weight is a factor too. Remember one of the benefits of using FBA is having Amazon ship your sold items to your customers. The weight handling charge is determined by weighing the box and packing material. For small items 1lb or less, the fee is $0.50. For larger items that are still 1lb or less, the fee is $0.96. As the items get larger and heavier, the rate increases. This is consistent with how the carriers Amazon uses to ship out the products figure their delivery charges.
There are different fee structures for other item types like media (ex. DVDs or books), oversized items (ex. water heaters, foam mattresses) and zero-fee (usually more expensive items like cameras or high-end jewelry).
This can get a little complex so let’s take a look at some examples of how these fees are applied. Believe it or not, these are real products found on Amazon and the fees were taken from the FBA calculator. These are a few examples for different categories of products, as you can see the FBA fees tend to get very high when selling over-sized / heavy items or very low-priced media items, but are reasonable for middle to high priced small and lightweight product.
As you can see, the fees vary widely depending on what the product is and the category it belongs to. It would be best to plug in the products you’re looking to sell and get an idea of the amount and types of fees Amazon may impose if you decide to join the FBA family.
Optional Service Fees
Even though there seems to be a variety of fees, remember that time is money, especially to a small business owner so offloading some of the tedious tasks to Amazon, like labeling your products or prepping shipments, may be worth your while.
FBA Label Service – Amazon requires that a label is placed on every item that is sent to them. Makes sense right? Now imagine if you’re sending in 10,000 snow globes. Every box would need to have a label stuck on it to show that these are your snow globes. Now that’s A LOT of work so you have the option to pay Amazon to do all this for you. They will charge you $0.20 for each package needing a label. Now your items need to be eligible for this service but most are. As long as there’s an existing bar code printed on the item’s box, you should be all set. This can only be set up for new, inbound shipments. Existing inventory already at their warehouses does not qualify for this service.
FBA Prep Services – When using FBA, your products need to be properly packaged and meet the packing and prep requirements before they will be received at their fulfillment centers. So one of the requirements is if you’re sending in loose items that are sold as a set, all the pieces need to be in one secure package that makes up the set. You can then choose to have Amazon do some of this prep work such as bubble wrap fragile or glass items, bag clothing items and even label each item. The fees can vary so take a look at the prep services schedule for more details.
And lastly there is a storage fee if you keep your items in Amazon’s warehouses.
Long-Term Storage Fees
As mentioned earlier, Amazon provides many services to its FBA subscribers. One of them is storing your products until they sell. Doing this ensures that Amazon can manage the purchasing process and streamline it so the customer has the best sales experience. The catch here is the storage space needed to house the millions and millions of items stored at their fulfillment centers worldwide is immense. Before these fees, there was nothing to stop you from sending in 1000 pet rocks. If you sold two a year, you were still making money and only paying pennies per month in storage costs. Now think if every FBA subscriber had a few slow moving items like that stored at Amazon’s facilities. They aren’t in the business of long-term storage. They are a short term storage solution for your items until they sell so to ensure that you keep an eye on those products, Amazon has instituted these long-term storage fees. Every August 15th and February 15th, items that have been stored for 6-12 months get charged $11.25 per cubic foot they take up. For items stored over 365 days, you are charged $22.50. It can get expensive so you need to manage your inventory wisely. There are tools and reports you can use to help in learning what items need to be looked at. Here’s more information about the long-term storage costs.
Amazon Seller Fees & FBA Fees Combined – The Complete Overview
This is a long post, so I’ll just give you an overview of everything that’s covered. These are all the Amazon Seller Fees you need to consider:
Overview – Amazon Seller Fees
We’ve all heard the saying – “knowledge is power” and knowing the Amazon seller fees when selling on Amazon is an important part in determining your profit.
To recap, they are:
- Monthly subscription – either professional or individual.
- Professional account = $39.99 per month
- Individual account = $0.00 per month
- Referral fee – this ranges from 6% to 50% of the final price depending on the item category. In most cases, it’s 15%
- A customer buys a toy for $25. The toy category carries a 15% referral fee so your fee will be $3.75 ($25 x 15% = $3.75)
- Per-item fee – if you chose the individual seller plan, you pay $0.99 per order plus the referral fee.
- A customer buys a toy for $25. The toy category carries a 15% referral fee so your fee will be $4.74 ($25 x 15% = $3.75 + $0.99 = $4.74)
Overview – FBA Fees
It may be easier to see what the fees pay for by breaking them down into four separate areas.
- Order Fulfillment Service – once an order is placed, it goes through the process of being picked & packed, weighed and shipped out. Fees are determined by various factors such as weight, dimensions, and other things. Check out the fulfillment fee listing here.
- Inventory Management – it takes a small army to manage the millions of products that Amazon processes and stores. This component includes the fees for monthly storage, long-term storage and some optional services like FBA label service and inventory prep.
- Customer Service – this component is self-explanatory. Amazon will handle any inquiries from your customers, tracking requests and product returns. The only fee in this part is for the product returns processing.
- Business Guidance – this part is more for educating yourself in learning how to sell on Amazon. Links to the seller forums, downloadable reports, and more help can be found here.
Take a look at the complete overview for more information and guidance.
Don’t let all these Amazon seller fees scare you. Running an e-commerce business does take effort, knowledge, and money but when the money is spent wisely, more effort can be put into the things that can take your business to the next level.
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