If you’re wondering whether selling with Amazon FBA is right for you, one of the first questions to ask yourself is, “How much will it cost me to use Amazon FBA?”
Fortunately, Amazon provides a page dedicated to introducing new sellers to the fees of using FBA.
Below, I’m going to provide an overview of each of these fees in detail. Also, based on my years as an Amazon seller, I’m going to provide insight into why the fees are important and what impact these fees will have on you.
Amazon Selling Plans: Individual and Professional
The first thing you have to decide when considering selling on Amazon is whether to sign up for an Individual or Professional account. This table on Amazon’s pricing page highlights the differences:
If you’re just going to sell a few things over a short period of time, the Individual plan is the way to go. The best example I can think of for whom the Individual plan is ideal for is a college student who wants to sell their books at the end of the semester to recoup some of the cost of the textbooks. They just want to sell the books they have right now, and when they are sold, they will stop selling on Amazon.
The Professional plan is for anyone who wants to sell more than just a few things. If you have ambitions beyond just a few sales, you should go with the Professional plan from the start. It lets you use all of the features on Seller Central, like advertising your own products, or adding users to your account to allow a 3rd party prep service to do work on your behalf.
Referral Fees, or Amazon’s Cut for Finding You a Customer
The referral fee is a percentage of the sale price of your item, and ranges from 8% to 20% depending on the item, with 15% being the most common. A product’s referral fees are very specific, and are broken down by product category. To give you an idea of a typical fee, Home & Garden’s referral fee is 15%.
Some products, such as books or music, also have “closing fees” in addition to the referral fee.
You can see the full list of fees in a table on this page.
Fulfillment Fees, or What You Pay Amazon to Pick, Pack, and Ship Your Product
This fee covers the cost to have Amazon, pick, pack, and ship your product to a customer. This fee puts the “F” in FBA, and it’s usually the biggest fee you’ll pay on a per-order basis. This fee is what makes your product part of the Prime program, so Amazon will ship your product with the same speed as customers have come to expect with their Prime membership.
The fulfillment fees Amazon charges are based on a product’s physical dimensions, volume and weight. There are 2 size tiers, standard size and oversize, and in general, the larger an item is, the higher the fulfillment fee. A portion of the fee table is shown below; see the complete table here.
Additional Fees
While there are many additional fees Amazon could charge you, the two fees most likely to be paid by sellers are storage fees and preparation fees.
Storage Fees: Monthly and Long-Term
Regular storage fees are calculated monthly, and are based on the volume your products occupy in an Amazon warehouse. The rate is different for 2 separate time periods: one rate for the months January through September, and another rate for October through December, a.k.a. the 4th quarter.
As you can see from the table above, 4th quarter storage fees are more than triple the storage fees for the earlier part of the year, so you need to be careful managing the inventory you send to Amazon from October through December. If you have slow-moving products taking up a lot of space, you could find 4th quarter storage fees eat up a lot of your profits.
There is another storage fee that applies to inventory that’s been in Amazon’s warehouses for over 365 days, called the long-term storage fee. In Amazon’s own words from the Seller Central help page about long-term storage fees, this fee applies to:
“Inventory that has been in a fulfillment center for more than 365 days is charged a monthly long-term storage fee in addition to the monthly inventory storage fee. Long-term storage fees are assessed using an inventory snapshot on the 15th of each month.
FBA calculates inventory age on a first-in, first-out basis across the entire fulfillment network. Items sold or removed are deducted from the inventory that has been in the fulfillment network the longest, regardless of which unit was actually shipped or removed. For example, if a fulfillment center associate picks and ships a unit that arrived in the fulfillment center recently, FBA will still deduct that unit from the oldest inventory in stock.”
The fee is charged on a per unit basis, and is $6.90 per cubic foot (volume) or $0.15 per unit, whichever is greater.
The best way to handle this fee is to avoid paying it altogether. By only sending product to Amazon that will sell in less than a year, you’ll never have to pay this fee, and minimizing fees is an easy to keep more profit in your pocket.
As an alternative, you can remove your products from Amazon’s warehouses before the fee is charged. See this post for a guide on how to create inventory removal orders.
Preparation Fees
Preparation (prep) fees include fees to apply barcode stickers to products, fees to bubble-wrap fragile items, or even fees to apply tape to boxes that may break open during shipping.
In the above example, it costs $7.20 to have Amazon label 24 units of a product for you, so the best way to avoid prep fees is to do the prep work yourself. If you have a label printer like this one, labeling 24 units of a product only takes a few minutes of your time. (See this page for a full list of tools you need to sell on Amazon).
Bringing it All Together: The Amazon FBA Fee Calculator
Amazon’s fee page includes a handy calculator you can use to calculate the exact fees your item will incur for a given sales price.
In the example below, I used an imaginary product in the Home & Garden category weighing between 6 and 12 ounces, with a cost of $4, that sells for $15. After the referral and fulfillment fees, and subtracting the product cost, the net amount from the sale is $5.91.
Not a Fee, But Still a Cost: Advertising
If you’re selling a product you manufacture yourself, one potential major cost is for advertising. While not technically a fee, it is something you should expect paying if you’re trying to increase the visibility of your own product on Amazon.
Advertising on Amazon is an entire topic unto itself, so for the purposes of this post, I just wanted to mention it as a potentially major expense you should plan for.
Interested in reading about my own FBA story? See this post about the evolution of my business since I started in 2015.
Ready to start selling yourself? Read my quick overview on the 3 main ways to find products, or see why library book sales could be a great place to start, of check out my full list of tools you need to start selling today.