Amazon FBA fees are what it costs you to sell your items via the Amazon platform. This includes your seller account fee, referral fees, fulfillment fees, storage fees, refund fees, and any other fees pertinent to your product.
While starting an Amazon FBA business offers a fantastic opportunity for small sellers to reach a broad customer base, how do you know you can make a profit selling your chosen product via Amazon FBA?
Amazon FBA fees can be tricky to calculate and can make the difference between a profit or a loss on a sale. So there are several types of fees you should understand before you begin selling on the platform.
This article examines each fee type and explains why Amazon charges them. When you add them all together, you’ll find the true cost of selling products via Amazon FBA in 2021.
To illustrate how this all works, I will use the example of a humble Blue Ray DVD of Dirty Dancing (one of my favorite films of all time!).
In this scenario, let’s assume I’ve got the DVD from a bulk buy at a bankruptcy auction. The DVD is still shrinkwrapped, so the condition is new.
I’ve calculated that I paid $3.50 for the DVD, and I’m hoping to sell it for $12.99.
Amazon FBA fees can be confusing at first glance. There are several types, and the costs layer up a bit like an onion, depending on;
- Your chosen type of seller account
- The product price
- The product weight
- The product size
- The Amazon product category
Before taking a deep-dive into the fees, I’ll quickly remind you of the difference between selling Amazon FBA and FBM.
FBA – Fulfilment by Amazon – You list products for sale, then ship them to the Amazon warehouse where Amazon stores them for you. When you make a sale, Amazon packs up the order and ships it directly to the customer.
FBM – Fulfillment by Merchant – You list your products for sale on the Amazon website, but store them yourself. When you sell a product, you have to package up the product and organize shipping to the customer.
To sell on Amazon, you first need to set up a seller account. There are two types of seller account – Individual and Professional.
An Individual account is ideal for small sellers just starting; there is no charge to register nor a monthly fee to pay. For an Individual seller account, Amazon charges you a per-item flat transaction fee of $0.99 for every sale you make.
The Professional account costs $39.99 per month. There is no per-item flat transaction fee of $0.99 when you sell an item with a Professional seller subscription.
A quick calculation tells you that if you manage to sell over 40 items per month, it makes sense to sign up for a professional account as you’ll save in the long run on that flat transaction fee.
If you choose an Individual seller account, you don’t need to pay the flat transaction fee up-front. Amazon deducts fees from the income of the sale.
If you choose to sell via a Professional account, then the $39.99 monthly fee is also deducted from your Amazon income. Though if you don’t have enough funds in your Amazon balance, Amazon will charge your credit card.
So in the example of our Dirty Dancing DVD, I have a professional seller account and make hundreds of sales per month, so I don’t need to factor in any Amazon account fees here.
When you sell on Amazon, you are a third-party seller. Amazon allows you to sell on their platform, so the cost of leveraging all that free shopping traffic is that you have to pay a referral fee when you make a sale.
The referral fee is a bit like an affiliate fee. Amazon want’s its reward for facilitating the sale.
Amazon charges referral fees as a percentage of the final product sale amount. The rate charged for a product depends on how Amazon categorizes the item.
Amazon publishes a list of referral fee charges for all of its product categories. The percentage charged can be as low as 8% and as high as 45%.
Here are a few examples;
- Clothing – 17%
- Unlocked cell phones – 8%
- Office products – 15%
- Amazon device accessories – 45%
You can see that Amazon is putting a high price on selling items related to its own-brand devices. You often find that products where Amazon makes a lot of profit themselves are categories where the referral fees are high.
Some categories, like luxury watches, have a split-level referral fee structure. If you sold a Rolex, Amazon would charge 16% of the first $1500, then 3% on the remainder.
Whatever products you choose to sell, Amazon has a minimum referral fee charge of $0.30. This is why you won’t find many products for sale on Amazon under $3-4; it cuts too much out of the profit margin.
You need to keep an eye on the referral fee charges. Amazon changes the amounts from time-to-time, and it can turn money-making products into loss-making ones. They usually give plenty of notice for any changes, though.
So, let’s catch up on our DVD. The referral fee percentage for DVDs is 15%, so Amazon will charge me a $2.25 referral fee when I sell the item.
This fee relates to the most significant benefit of selling via Amazon FBA – product fulfillment. For small operators, packing and dispatch can take time away from sourcing or marketing products. So having this side of your business handled is a big plus.
Amazon will also deal with returns and any delivery issues too, so you don’t need to get bogged down in customer service issues.
All this convenience comes reasonably priced. You benefit from the reduced shipping charges that Amazon negotiates with logistics companies, and you can be confident that your item will be packaged well.
Amazon calculates the fulfillment fee based on the size and weight of your item. Amazon makes a slightly higher charge for apparel items, as you can see in the Amazon FBA fees tables below.
These tables relate to small to medium-sized products.
For larger products – which Amazon calls over-sized – there is a separate fulfillment calculation.
In the case of our DVD, it counts as a small standard-size, so the fulfillment fee Amazon will charge me to pack and ship the item is $2.50.
For Amazon to meet the demand for the products they sell, they maintain massive warehouses across the countries they serve. Some of Amazon’s costs for rent, staffing, and maintenance of their warehouses are passed on to FBA sellers through storage fees.
Amazon charges two types of storage fees: the first is the monthly storage fee, and the second is a long-term storage fee.
Monthly storage fees are a little complex to calculate, as they are based on the daily average number of cubic feet you use in the warehouse. The charges also vary depending on the time of year. The amount charged increases in the fourth quarter of the year as competition for sales heat up in the run-up to Christmas. Amazon would also like the space for their products.
Monthly storage fees are calculated a month in arrears, which means you get charged for the average number of cubic feet you use in the warehouse for January in February.
The charges are applied to your Amazon account balance around mid-month. If you don’t have sufficient funds in your account, then Amazon will charge your credit card.
Long-term storage fees are charges you want to avoid paying if you can. Amazon will only stand your products taking up space in their warehouses for so long. Remember, Amazon makes money when items are selling, so if your products are slow-movers, then Amazon is missing out on potential referral fees.
Amazon would prefer the space your slow-moving product takes up went to alternative faster-selling products. So Amazon incentivizes you to either remove slow-moving stock from the warehouse or lower your selling price to encourage sales.
Amazon does this by adding an extra storage fee for items you have stored in the warehouse for over 365 days. These slow-moving items get an additional monthly storage fee of $6.90 per cubic foot or $0.15 per month, whichever is the higher amount.
Here’s an example.
If you have a lot of slow-moving stock taking up space in the Amazon warehouse, Amazon may lower the amount of new stock you can send in until you have sold or removed the slow-moving inventory.
Long-term storage fees can quickly add up too. You don’t want to get caught out with thousands of items going over the 365 days storage threshold.
So in the case of our DVD, I’m confident it will sell in a month or so, but to be safe, I’ll build in a cost of three months storage of about $0.09. Let’s add it to the running total and see how we’re doing.
It happens, and it can be frustrating. A customer buys an item from you, and for whatever reason, decides they don’t like it. So they send it back to Amazon for a refund.
This is problematic in several ways. First, Amazon will charge you for processing refunds. Second, if the item is in retail packing and the customer opened it first, then you now have a ‘used’ item you can’t sell again for the same price.
The refund fees Amazon charges are a little tricky to explain. It depends on whether the item in question is a media item or a non-media item. It also matters if you have an Individual seller account or a professional seller account.
If you have an Individual seller account, Amazon keeps the $0.99 flat-transaction fee. For professional sellers, Amazon hasn’t charged this, so you won’t need to worry about it.
For non-media related items, Amazon keeps 20% of the referral fee and fulfillment fee up to a maximum of $5.
Amazon does not charge you for refunds for media-related items (books, DVDs, music, and video). Any referral and fulfillment fees Amazon has charged you are refunded, and it’s as if the sale never took place.
Presuming the customers return the item in the same condition, it can go back in your warehouse storage and be sold again. The catch is, you won’t know the real condition unless you recall the item from the warehouse to inspect it, which has a cost.
Called a removal fee, Amazon charges you to have the item shipped back to you and bases it on product weight. If you don’t want to receive it back, you can choose to have it disposed of for the same price.
Whether you use this option to recall returned items to inspect them is a matter of choice. You may choose to dispose of the item and mark it off as a loss – the cost of doing business via Amazon FBA.
As I’m selling a DVD, I won’t need to worry about the refund fee, so let’s update the overall Amazon fee calculation.
There are also a few miscellaneous fees that sometimes apply when you sell on Amazon.
There is an additional charge made for selling potentially hazardous products. Items that fit in this category are those containing lithium batteries, like laptops. Cleaning products that contain corrosive liquids can also fall under the dangerous goods category.
You can find further details on the Amazon seller website for the extra charges for dangerous goods.
One miscellaneous fee I need to consider is the ‘closing’ fee Amazon adds to media products. A flat charge of $1.80 is added to media products. Amazon says the following:
“Media categories are Books, DVDs, Music, Software & Computer/Video Games, Video, Video Game Consoles, and Video Game Accessories.”
I believe that Amazon adds this charge to reduce third-party sellers’ ability to compete in traditionally core Amazon product categories.
But, I want to sell my DVD, so let’s add the $1.80 final closing fee to our running total.
So with a target selling price of $12.99, I calculate that the cost of selling my Dirty Dancing BlueRay DVD at $6.64, giving me a return of $6.35. Remember, I paid $3.50 at the bankruptcy sale, so my net profit for this item is $2.85.
I have not factored in here the price to ship the item into the Amazon warehouse. This will vary depending on your location, the carrier you use, and the number of products you are shipping at any one time.
As a rule of thumb, if you budgeted $0.20 per item for small products like DVDs, then you wouldn’t be too far off.
$2.65 doesn’t sound like a huge return on an item that costs $3.50 and sold for $12.99. But you need to think about Amazon as a low-margin high-volume business opportunity. You’ll face stiff pricing competition from other third-party sellers and Amazon themselves.
But there are also millions of shoppers that buy from the site daily. So if you choose to sell via Amazon FBA, look to make volume sales rather than fewer higher-margin sales.
As you can see, Amazon FBA fees quickly stack up. And understanding them can sometimes be tricky, as different product categories attract additional percentage-based fees.
Fortunately, there is a free online tool that works out all the fees for you. With the Amazon fee calculator, you simply enter a product identifier and add your cost price, and it calculates the rest for you.
To find out how to use it effectively, feel free to jump over to my Amazon FBA post, in particular, the section on ‘How to use the Amazon FBA Calculator and Calculate the Financial Viability of your Products’.
In the meantime, I hope this article has helped you glean some understanding of what is quite a complex fee structure. Put simply, the goal is to buy as low as possible and sell as high as the market will allow!
Thanks for reading, all the best with your Amazon business!