If you’re selling on Amazon, it’s good to be aware of how much they’re going to charge you and how they’re going to charge you so you can make sure you’re getting a positive ROI.
Amazon fees can creep in everywhere, and over time they eat away at your balance until it hits payday and you’re getting significantly less cash from Amazon than you anticipated.
Because of this, in this post, we’ll go over all the ways Amazon charges you and how you can stay ahead of their fees so you can turn a profit.
Amazon’s Referral Fee
The Amazon referral fee is a fee charged whenever you sell a product on Amazon.
It confers no benefit and provides no kind of service, this is “Amazon’s cut” for selling on their platform.
This is one of the big fees from Amazon, as it takes the money right off the top of a sale and is based on a percentage of the retail price that your product sells for.
The percentage Amazon takes for a referral fee depends on the category your product is in, which can range anywhere from 8% - 15% of the retail price of your product.
How to save on referral fees
While not possible for most products, you can sometimes change the category of your product to one that has a smaller referral fee.
Look over your product catalog, and take note of which category each product lives in.
After that, see if there are any similar product categories that your product can possibly live in, and if you find a potential match, swap the category of your product to the new one with the lower referral fee (may require contacting Amazon Seller Central support to get this done).
Amazon’s FBA Fulfillment Fee
Another big one which is probably the biggest fee coming out of Amazon for sellers is the Amazon Fulfillment Fee which Amazon charges for every product sold to pick, pack, and ship your product out.
The fee charged here is based on the weight and physical dimensions of your product and varies wildly from product to product.
Ways to Save on Fulfillment Fees
- Look into the Amazon FBA Small & Light program. If your products qualify, you will get smaller fulfillment fees.
- Reduce product volume by using less excessive packaging.
- See if you can sell multiple units as a single SKU packed tightly together on Amazon. An example of this is some ceiling LED lights I bought last weekend. They sell a single light for $30 but can sell a double pack for $50. The reduced fulfillment fee from packing 2 lights together allows them to pay less to ship a unit out, so much so that they can even pass on some savings to the customer.
The Fastest Way to Find Potential Fulfillment Fees
If you’re researching your next product to sell and want to know the fastest and easiest way to calculate fulfillment fees without digging into volumes and weights and categories, follow these steps:
Gather up some competing products
The first thing you want to do is find products that are the most similar to the product you’re planning on launching.
You want to make sure that they are similar in size, weight, and product category, things like features and branding are irrelevant here.
Load up Amazon’s Revenue Calculator
Amazon has an official tool called Revenue Calculator (or Profitability Calculator) where you can break down the exact fulfillment cost of any product they sell on the platform.
The best part? You don’t even need an Amazon Seller account to use it!
Just pop an ASIN of a product into the search field, and Amazon will pop out a bunch of numbers.
In this case, I put in a pricey mechanical keyboard in the search.
Let’s see what comes out.
Get the cost breakdown
What you want to look for is the Amazon fulfillment section.
This is what it looks like:
These are the big 3 costs associated with this product, Amazon (referral) fee that we went over earlier, the fulfillment cost, and the storage cost (which we’ll go over next).
Since this product is on the pricey side of $149, when you add in Amazon’s fees, they will come out with $123.28 cash for every product sold.
Sounds nice, but these types of products are notoriously pricey to manufacture, but we’re just doing this exercise to show how easy it is to find out how much Amazon is going to charge you to store and ship your products.
Do this over again with similar-sized products in the same category and you will begin to see how much it will cost you to store and ship your developing product on Amazon.
Amazon’s Storage Fees
If there’s one thing Amazon doesn’t like, it’s inventory sitting in their warehouses for long periods of time.
Amazon’s storage fees can hurt your business badly if you’re not careful.
When you’re calculating profit margins for your business, always make sure that you’re anticipating storage fees.
Storage fees are based on the size of your products and are charged monthly.
You can see a detailed breakdown of storage fees on Amazon’s official fee page, but it’s fairly simple:
- Standard-sized products:
- January - September: $0.75 per cubic foot
- October - December: $2.40 per cubic foot
- Oversized products:
- January - September: $0.48 per cubic foot
- October - December: $1.20 per cubic foot
As you can see, the last quarter of the year is very expensive for storage, so plan your inventory management accordingly.
Watch out for long-term storage fees
If your inventory stays longer than 1 year in Amazon’s warehouses, they will start to charge you an obscene amount of money ($6.90+ per cubic foot) to keep it in storage. Check Amazon’s Aged Inventory page for exact details.
If your inventory is close to hitting the 1-year mark, you should take action to get it out of Amazon’s warehouses ASAP.
This could mean doing things like:
- Running a deal (lightning deal, coupon, 7-day deal, etc.) to sell off old inventory
- Send the inventory back to you from Amazon so you can “refresh” it
- Destroy the inventory
- Sell it off in bulk to Amazon
Also, it’s good to note, if some products are hitting the 1-year mark within Amazon’s warehouses, it’s a sign that something is wrong with that particular product or how you manage inventory.
Reassess any inventory that is in storage at Amazon for too long, and see about either discontinuing the product, sending smaller amounts to FBA warehouses or something to remedy this problem.
No seller should ever be at risk of having inventory at an FBA warehouse for longer than a year.
Amazon’s Returns Fees
Returns is another aspect of selling on Amazon that if not managed properly will eat your profit margins alive.
Whenever someone returns a product, you lose all the revenue for that purchase, PLUS Amazon charges a fee to “process” the return.
On top of that, it’s likely the customer has damaged or used the product to the point where you will not be able to sell it as new anymore.
Also, with returns, Amazon will charge you a fee of whatever % the refund is multiplied by the Amazon referral fee.
So if you process a return for a $10 item, and the referral fee is $1.50, then Amazon will charge you an additional 20% of that referral fee (in this example, $0.30) when it’s returned by a customer.
In short, returns are extremely costly.
Do what you can to reduce the return rate of your products, as it will greatly reduce all the associated costs of having to process and deal with them.
Amazon has a Returns processing page showing just how much it is to process a return, not to mention all of the other added costs of returns just mentioned.
Amazon Seller Membership Fee
To simply be able to sell on Amazon, you are charged a monthly fee of $39.99 per month for their Professional plan tier.
This fee can be avoided, but you will be selling under an “Individual” account and will be charged $0.99 per item sold.
Doing the math here, it’s obvious that if you’re planning on selling over 40 units per month, you’ll want to use the professional plan
Other fees
There are a ton of other fees charged by Amazon here and there, but they’re not as apparent and impactful as the fees we mention above, but still worth noting.
You can see these fees on Amazon’s Cost to Sell on Amazon page, and these fees include things like:
- Advertising fees. These are the general fees and costs associated with running ads on Amazon.
- Inventory Placement Service. Sometimes Amazon will consolidate your inventory from different warehouses into a single shipment to the customer, which they charge an individual per-unit fee for.
- Amazon-partnered carrier fee. This is the fee associated with sending your products to FBA warehouses through freight or UPS. This fee is actually a good thing as Amazon’s rates are way cheaper than doing it yourself (usually).
- Assorted inventory fees.
Conclusion
There you have it, a breakdown of all the major fees you’ll encounter as an Amazon seller.
There are of course more fees that you will likely face, but these are the major ones that will have the most impact on the amount of cash as part of Amazon’s Payout Schedule.
Get to know these fees well, adjust your prices accordingly, and good luck selling!
