Selling on Amazon can be a great way to break into the world of eCommerce as a growing business. This is particularly true for those who either don’t want to maintain a storefront or are looking to capitalize on the world’s top online marketplace. However, driving income isn’t as easy as listing products and watching the sales roll in—fees apply to Amazon sellers, which can take a chunk out of profits. Let’s look at what you need to know about how much Amazon takes from sellers.
- Selling on Amazon isn’t free; there are always fees associated with making transactions, though which fees apply can vary between sellers and products.
- The seller experience with fees can be very different, particularly when using Fulfillment by Amazon, a service in which logistics like storage and shipping are handled by Amazon’s team, including storing, packing, and shipping.
- Understanding how Amazon’s seller fees apply to your business can help guide your decision-making processes, providing insight into how your business can best turn a profit.
Amazon seller fees
Selling on Amazon can certainly be a way to drive revenue and grow a brand, but acknowledging the applicable costs is a big part of estimating potential profits. On the surface, the sales process seems simple: list items and earn money. However, before committing, it’s important to know exactly what fees may apply and how to calculate them.
Amazon provides two different options for FBA sellers:
- If you’re selling items here and there, as an entrepreneur or startup, an Individual plan might be the best choice. Costing $0.99 per sale, this option tends to be the best value for those who plan to sell fewer than forty products per month.
- The Professional plan, on the other hand, costs $39.99 each month, regardless of items sold. There are other pluses that come with the Professional plan, too, which include:
- Multiple users per account,
- Bulk product listings and inventory management,
- Automate Buy Box pricing,
- Participate in Global Selling, Local Selling, and Renewed seller programs, among others,
- Set shipping fees,
- Access order management reporting options.
Per item fees
With an Individual plan, per-item fees apply to each and every sale: just under a dollar per customer purchase. This is fine for small-scale sellers, or those just experimenting with an Amazon storefront. But if growth on the platform or operating a business is a goal, paying $0.99 per item will catch up to the subscription fee model quickly. In addition, paying fees per item means missing out on perks only available to subscription-level sellers—including the inability to utilize paid advertising tools—which can make any savings largely negligible.
Shipping fees will apply in some way or another for every seller on Amazon because that’s the only way to get your product from Point A to Point B.
- For Individual sellers who are handling their own fulfillment (and qualifying media products, including books, music, and video game consoles, sold by Professional sellers), shipping rates on domestic sales are calculated by Amazon. This pricing is based on item size and product category, usually ranging between $3.99 to $14.95. It’s important to note that:
- These fees are applied to the buyer’s total price at the time of purchase. However, it’s up to the seller to actually ship the product, which requires handling the physical process of packing and mailing the items.
- This can mean spending less than the price charged to the customer or potentially more depending on the service selected.
- Professional sellers can set their own shipping rates for eligible products, but the same premise applies: the actual cost paid to ship products will depend on the service used and the item itself.
For sellers who are using Amazon’s fulfillment services, shipping costs are part of Fulfillment by Amazon fees, which will be covered later on in this article.
Referral fees are charged by Amazon on each item that is sold, regardless of seller plan or fulfillment method. These are on top of any other fees that may apply to a particular purchase. These fees are usually a flat percentage based on the product sold, but how much the fee is will vary based on the product category.
Most fees are around 8% to 15%, but others can be as high as 96%. While these costs may seem arbitrary, it’s important to know the fees that apply to the product categories you’re planning to sell.
In virtually all categories, the minimum service fee is $0.30, regardless of the percentage that may apply. For reference, if you sell a product for $3.00 in a category with an 8% referral fee, you’ll actually be required to pay a 10% referral fee due to the category minimum.
These are some of the most common referral fee classes to keep in mind when listing products for sale:
- Beauty products: 8% for products under $10.00; 15% for products over $10.00
- Clothes and accessories: 8%
- Consumer electronics: 8%
- Footwear: 15%
- Gift cards: 20%
- Books, DVDs, videos, and music software: 15% with no minimum fee.
- Games and toys: 15%
- Watches: 16% for products under $1,500; 3% for any proceeds above the $1,500 mark.
For referral fees not included above, Amazon provides a full referral fee table.
Variable Closing fees
In addition to referral fees, Amazon also imposes a closing fee on each sale of media products, including books, videos, DVDs, music, and video games. While these fees used to be percentage-based, they are now largely limited to a fixed cost of $1.80 per product. For this reason—the combination of item fees for Individual sellers, referral fees, and closing fees—media sales under $10.00 are very unlikely to turn a profit.
Refund administration fees
As a business, you know refunds are bound to happen. As an Amazon seller, it’s important to know the costs associated with this process.
Amazon does permit refunds on sold items, but there will still be an impact on sellers’ wallets. The referral fee paid for the item sale will be refunded, but not in full. There’s an administration fee charged to process refunds, which is either 20% of the referral fee or $5.00, whichever is less. This means that if you sold a $20.00 product with a 15% referral fee, $2.40 of the $3.00 referral fee will be returned with the remaining $0.60 kept as an administrative fee.
Fulfillment by Amazon (FBA) is a program offered where inventory management and fulfillment are handled by Amazon rather than the seller. Instead of each business managing its own products on warehouse shelves, packing orders into boxes, and dropping those boxes off at shipping centers, Amazon’s team does this heavy lifting.
FBA is a convenient option, especially for companies looking for fast growth without any of the challenges that can come with building out a fulfillment system in-house. However, new sellers aren’t automatically accepted into FBA; they need to have a track record on the platform and go through several steps to get set up. Getting established takes time, as products have to be labeled, sent to Amazon, and processed for fulfillment to get underway.
Costs covered by FBA include factors like:
- Storage space,
- Processing product returns,
- Customer service support.
There are two price components of standard FBA: storage space and shipping services. The latter is based on product weight, which is categorized into size tiers based on apparel and non-apparel products. This is then broken down by off-peak and peak time periods.
We’ve outlined one of many fulfillment situations you may find yourself in. Here is a step-by-step breakdown of how you may begin calculating a typical FBA cost::
- You sell apparel items that fall into Amazon’s “small standard” size tier, and all weigh between eight and 12 ounces.
- Based on Amazon’s current pricing, the non-peak charge for each item would be $3.87 during off-peak seasons (mid-January to mid-October) and $4.07 during peak season.
- If you sell 100 items during off-peak and 100 items during peak season, the cost will total $794.
- But this doesn’t take storage into account. Say your products need 20 cubic feet of storage space.
- From January to September, this would cost $0.87 per cubic foot per month, and $2.40 per cubic foot from October to December.
- This would come to a total of $156.60 total for the first nine months of the year and $144 for the peak season, for a total annual cost of $300.60 in storage expenses.
Note that the bigger and heavier items are, the higher the expenses get—often by a significant measure. For a single product that falls into the non-apparel “special oversize” category that is 150 pounds, it would cost $158.49 to store in the off-peak season. There would also be an additional $0.83 per pound above the first 90 pounds for a total of $208.29 per product just for inventory management.
Other FBA fees to consider
In addition to these basic costs for storage and service, there are a few other costs that may apply for FBA. These include:
- Aged Inventory: An extra charge that may apply for inventory that has been in a fulfillment center for more than 180 days.
- Removal Orders: Charges to have Amazon remove and dispose of unwanted inventory.
- Returns Processing: A charge associated with Amazon’s free returns service.
- Unplanned Services: Any expenses associated with products that are delivered without proper preparation or labeling.
- Optional Inventory Placement: Charges pertaining to an optional service that allows inventory to be placed in multiple distribution centers nationwide, allowing for faster shipping opportunities for customers.
- Dangerous Items: Products classified as dangerous may be subject to additional charges.
Despite the expenses, there’s one big plus Amazon touts about their FBA program that can’t be recreated otherwise: products generally qualify for Prime shipping benefits. For customers with Amazon Prime, the one or two-day shipping options are incredibly appealing. When purchases are high priority or shoppers are used to speedy shipping, buyers may default to products that are Prime-eligible, even if the costs are higher.
Fulfillment by merchant is the default option for Amazon sellers. This means sellers handle all fulfillment activities in-house.
There are no direct expenses outside of the normal costs of doing business as an FBM seller, as this isn’t a comprehensive program like FBA. However, selling this way means more logistics planning for the business itself. Whether this is worth it for your brand will depend on objectives and the capacity for inventory management. In addition, FBM sales do not qualify for Amazon Prime, which is something important to keep in mind.
Miscellaneous seller fees
There are a few other kinds of fees sellers may experience, though they aren’t common. These include:
- Rental Book Services Fees: Textbook rentals are subject to a fee of $5.00 per rental
- High Volume Listing Fees: Customers with a high volume of listings that have not sold in over a year will be assessed a fee of $0.005 per listing for cataloging costs.
Indirect costs of selling on Amazon
Selling through Amazon doesn’t negate other costs that you might incur if you were selling elsewhere, like advertising and marketing. The seller fees also don’t account for things like the cost of goods sold, which will include the requirements to bring your product to shelves, like:
- Raw materials,
- Labor costs,
- Packaging costs,
- Anything required to prep products for resale.
Your net profit is calculated by taking the revenue of a sale and subtracting all applicable costs. If you sold ten products for $100 each, your revenue is $1,000, but that’s not your profit. To understand what you actually made on the sale, you’d need to calculate the costs associated with creating the product, and marketing it, fees charged by Amazon, and other applicable fees.
While your brand is likely already tracking these costs, it’s worth looking into expected Amazon costs prior to setting up a storefront. For many businesses, Amazon makes sense as either a primary or secondary way to sell, but this won’t be universally true. Depending on your products and price point, the fees associated with Amazon may result in low net profits. This isn’t common, but in some cases, selling on other marketplaces, like Walmart, may be a better alternative.
While Amazon is a popular eCommerce marketplace, it’s worth understanding the pros and cons before diving in. Many seller fees can apply to your brand, ranging from shipping costs to referral expenses—and even more for companies using FBA. Although these might add up, Amazon remains the gold standard for online selling. With benefits ranging from 310 million active users, and inventory management to the popularity of Amazon Prime shipping options, there’s plenty of potential for business growth.
If your company is looking to expand into Amazon in the most cost-effective way possible, subscribe to our newsletter below to learn more about how to scale your business successfully through Amazon’s marketplace.
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