Understanding Amazon's Fees: A Guide for Sellers to Maximize Profit Margin
Co-authored by Jen Garza and Chat GPT
Selling on Amazon is a great way to reach a wide customer base and increase your sales. However, it’s important to understand the fees involved with selling on Amazon to ensure you make a profit. In this article, we will discuss the various fees that come with selling on Amazon.
Referral fees - The first fee you will encounter when selling on Amazon is the referral fee. This fee is a percentage of the sale price and varies based on the category of the item sold. The referral fee ranges from 6% to 45% and is deducted from the sale price when the item is sold.
For example, if you sell a product for $100 in a category with a 15% referral fee, you will pay $15 to Amazon as a referral fee.
Fulfillment fees - Amazon offers two fulfillment options: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). If you choose FBA, Amazon will handle the storage, packing, and shipping of your products, while FBM means you will handle these tasks yourself.
Fulfillment fees are charged when you use FBA. These fees vary depending on the size and weight of your product. For example, a small standard-size item may cost $2.50 to fulfill, while a large oversize item may cost over $100 to fulfill.
Storage fees - If you use FBA, you will also incur storage fees. These fees are charged monthly based on the amount of space your products take up in Amazon’s warehouses. The fees vary based on the time of year and the size and type of your products.
Subscription fees - If you want to sell on Amazon, you’ll need to choose between two types of accounts: Individual and Professional. Individual accounts are free to set up, but you’ll pay $0.99 per item sold, while Professional accounts cost $39.99 per month.
If you plan on selling more than 40 items per month, it’s usually more cost-effective to choose a Professional account.
Shipping fees - If you opt for FBM (Fulfillment by Merchant) rather than FBA, you’ll need to ship your products to your customers. Amazon offers two shipping options: Amazon’s Buy Shipping and self-fulfilled shipping.
If you use Amazon’s Buy Shipping, you’ll pay a fee for the shipping label, which varies based on the weight of your item and the shipping method you choose.
If you choose self-fulfilled shipping, you’ll need to calculate your own shipping costs and charge your customers accordingly.
Refund fees - If you refund a customer order, Amazon will refund you the amount of the referral fee you paid for the items, minus a refund administration fee. This fee varies by category but is typically the lesser of $5.00 or 20% of the refunded amount.
It’s crucial for a seller to understand the fee structure on Amazon in order to determine the most successful fulfillment method and ensure products are priced correctly. By factoring in these fees, you can determine your true profit margin and make informed decisions about your pricing strategy. As always, be sure to consult with an Amazon account management agency if you need help with this process.
