Last updated on May 21st, 2024 at 12:24 pm
When sellers sell items on Amazon FBA, Amazon takes care of storage and order fulfillment, which makes running their business easier. Amazon FBA fees, on the other hand, make these perks less free.
Businesses that sell on FBA will have to pay a lot of different kinds of fees. Figuring out how those fees are calculated can help you avoid extra fees or charges you didn’t plan for. Knowing what to expect helps you budget for future costs.
For Amazon FBA Sellers, this piece will focus on all fees that are unique to them, especially storage and fulfillment fees. For each type of fee, we’ll show you how to figure out the amount it costs.
Read More: Selling on Amazon Like a Boss in 2023: 7 Books For Beginners
What Do Amazon Fees Depend On?
There are a lot of different Amazon selling fees that could be confusing for new business owners. Fees are mostly based on:
- Choosing an Amazon Seller plan (personal or business); Products (referral fees); and Fulfillment method (FBA or FBM).
- Amazon selling account or plan: personal or business
- Each plan or account type has two options: individual and business. The seller pays $0.99 per item sold with Amazon’s Individual Selling Plan. The seller pays $39.99 per month with Amazon’s Professional Selling Plan, no matter how many things are sold.
We can see from the numbers that an individual plan might be a good choice if you sell less than 40 things per month. If not, a business account is a good choice.
Referral fees are listed as a portion of the total price of a product sold. Amazon decides whether to charge a minimum amount or a portion of the total price, which includes the cost of the item, shipping, and gift wrapping. What you sell sets the referral fee.
Regarding watches costing more than $1,500, as an example, connection fees begin at 3%. Amazon gadget accessories have a maximum referral fee of 45%. The lowest recommendation fee is $0.30, and the highest is 15%.
Type of fulfillment: Amazon FBA or FBM
Depending on who is in charge of the logistics, there are two ways to deliver orders:
- Fulfillment by Merchant (FBM);
- Fulfillment by Amazon (FBA).
- Fulfillment by merchant
If a seller handles fulfillment by the merchant, they store, ship, and help customers, either on their own or with the help of a third party. You can save money on Amazon fulfillment fees with this method, but you will have to handle the shipping of your items yourself.
If you want to show off Amazon’s Prime badge while working from home to complete orders, you have to wait on a list and go through a qualification process.
Amazon has a logistics system that is one of the best in the world. As part of Fulfillment by Amazon, workers receive and store goods at Amazon fulfillment centers.
They also pick, pack, ship, and handle items, and help customers and handle returns. FBA sellers’ ads come with Amazon’s Prime badge for free. If you choose to sell on Amazon through the FBA program, these steps are needed:
- Set up your FBA account and your sales account.
- Follow Amazon’s instructions for getting the products ready.
- Bring your products to the Amazon warehouse
- Pay FBA fulfillment and storage fees as well as any other fees or charges that come up.
You can use tools from Amazon, such as a fee calculator, to figure out how much of an amazon’s profit you’ll make from selling things on Amazon and to compare your present fulfillment methods to Amazon’s.
Amazon FBA Monthly Storage Fees
If you store items in an Amazon FBA fulfillment center, Amazon charges you every month. The seller has to pay certain fees, which are based on several factors, such as:
- Product size tier;
- Time of the year;
- Volume per unit;
- Average daily units in storage;
- Dangerous goods classification (if applicable)
How To Calculate Monthly Storage Fees?
Here is the formula Amazon FBA uses to figure out the monthly storage fee:
Fee for each product = Average Daily Units x Volume per Unit x Rate
What affects the rate is the time of year, the size of the goods, and whether they are considered dangerous or not. Since how many of your goods are stored at Amazon FBA (in units and volume), the average daily units and volume per unit are the things that change for your business.
Amazon FBA can give you rates that you can use to figure out how much your monthly storage fees will be. Let us look at them.
Product Size Tier
There are two main types of goods in Amazon FBA: standard-size items and oversized items. These are further broken down into subcategories, for a total of six levels of product sizes:
- Standard-sized:
- Small;
- Large;
- Oversized:
- Small;
- Medium;
- Large;
- Special.
For each product, you need to know its unit weight, product dimensions, and dimensional weight to figure out which of the above groups it belongs to.
Time Of The Year
As an example, Amazon FBA sellers will get paid $0.87 per cubic foot per month for standard-size items kept during the off-peak season, and $0.56 per cubic foot per item that is too big to fit.
During the busy season, Amazon FBA sellers will be charged $2.40 per cubic foot for standard-sized things and $1.40 per cubic foot for items that are too big. These prices are only for things that aren’t dangerous.
It’s not a big surprise that keeping things during the busy season will cost more than during the slow season, as shown above. But it’s less expensive to store items that are too big than ones that are the right size.
That’s a strange thing. Amazon says that it’s more expensive to store standard-sized items because they need special shelves, drawers, and bins than other things.
Volume Per Unit
This metric gives the cubic-foot-based amount per unit. According to Amazon FBA rules, this only applies to the fully packaged item.
Daily Units On Average
It’s how many units are stored on average every day in Amazon FBA every month. Looking at your Monthly Storage Fees Report is the best way to find that number for your business.
Dangerous Goods
Through Amazon FBA, sellers can offer and keep dangerous goods. There are a lot of Amazon FBA sellers who will be affected by this group, even though it might not seem like enough.
Smartphones, laptops, spray paint, household cleaners, cartridges, toners, perfumes, and many other things are included in the list of dangerous items.
Many different things can be considered dangerous. You need to know if your goods fit into this group or a different one. They won’t be able to be sold if they aren’t properly classified.
Storage Utilization Surcharge
A surcharge for storage utilization will be added to the monthly storage cost by Amazon FBA for professional buyers whose storage utilization ratio is more than 26 weeks. These sellers don’t have to pay the storage usage fee:
- There is a surcharge for professional sellers with a storage utilization surcharge of less than 26 weeks, individuals who have an individual selling account, sellers whose daily volume is less than 25 cubic feet, and new sellers who sent goods to Amazon FBA within the last 52 weeks.
- Finding the ratio is as easy as dividing the average daily Amazon FBA Product volume by the average daily shipping volume. Therefore, the ratio tells you how much product you keep with Amazon FBA and how much you send out. Eighteen weeks ago, it was calculated in cubic feet.
Storage Utilization Surcharge – Fee Structure For Off-Peak Season
To make up for the slower months (January to September), professional sellers whose storage utilization ratio is between 26 and 39 weeks will have to pay an extra $0.69 per cubic foot on top of their base monthly storage fee of $0.87 per cubic foot for standard-sized items.
The total monthly fee for storage will be $1.56 per cubic foot. Although, things that are too big will cost an extra $0.46 per cubic foot on top of the monthly storage fee of $0.56 per cubic foot, for a total of $1.02 per cubic foot.
Professional sellers will have to pay an extra $0.94 per cubic foot on top of their base monthly storage fee of $0.87 per cubic foot for standard-sized things if the utilization ratio during the off-peak season goes over 39 weeks.
The monthly storage fee will be $1.81 per cubic foot. Things that are too big will cost an extra $0.63 per cubic foot on top of the monthly storage fee of $0.56 per cubic foot, for a total of $1.19 per cubic foot.
Storage Utilization Surcharge – Fee Structure For Peak Season
It is important to know that the utilization tax doesn’t change during the peak season (October–December). This means that the fees are the same during peak and off-peak seasons.
The monthly storage fees change with the seasons, though, so the total amount of storage fees will be different for each (more during the peak season).
How To Remove Or Dispose Of Your Inventory Products
There are two options for getting rid of or returning things that you don’t want in your inventory:
Removal Order Fee
Things can be sent back to you, your warehouse, your seller, or your distributor if you decide to do so. You can’t fax them to your customers or send them to another fulfillment center.
After two weeks for shipping, the move could take up to 90 days. So the process isn’t quick, and Amazon makes it clear that it can’t be sped up whatsoever.
Based on how much the shipment weighs, the removal order fee is charged per unit. Standard-sized things will cost between $0.97 and $2.83 plus $1.06/lb over 2 lb.
The rate will depend on the weight of the item being shipped. Based on the weight of the item, rates for oversize and special handling items run from $3.12 to $13.05 plus $1.06/lb over 10 lb. This includes dangerous goods as well as some clothes, shoes, watches, jewelry, and other items.
Disposal Fee
If you decide to get rid of your goods, the fees and costs are the same as for the removal order fee. But the process is much faster; it only takes 14 days on average.
Fees That Only FBA Sellers Pay
These are the Amazon fees you’ll have to pay if you wish to sell something through FBA.
FBA Fees
You don’t have to pay for shipping, packing, or packaging of your items when you sell on FBA. Amazon’s fulfillment workers will pick, pack, and ship your items instead. Amazon charges selling fees that are based on the size and weight of your item to cover these costs.
Amazon is going to start using new, more detailed rate cards for standard-sized items on February 5, 2024. They will also add big bulky and extra-large size tiers.
For standard-sized and big bulky-sized items, FBA fulfillment fee rates will go down starting April 15, 2024. From February 5, 2024, to April 15, 2024, new prices and size tiers will be in effect.
Low-Level Inventory Fee
New low-level stocking fees will be charged by Amazon starting April 1, 2024. Standard-sized things that are often out of stock compared to customer demand will have to pay this fee.
Other Costs And Additional Amazon Selling Fees
You should be aware of the extra fees that Amazon charges its customers. The following are:
- Reservation book service fees;
- High-volume listing fees (costs of cataloging);
- Refund management fees.
If you want to grow your business while selling on Amazon, you can use several external programmes:
- Advertising
- Inventory Placement
- Premium Account Services (coaching, training, and sales growth)
Reasons to Calculate Your Amazon FBA Fees
Multiple buyers see Amazon FBA (Fulfillment by Amazon) as a mysterious black box. Amazon takes care of everything else, and then sales start coming in.
However, before you get too excited about how convenient FBA is, there’s an important step that many people forget: figuring out your Amazon FBA fees. This is why knowing these prices is important for making an Amazon business that makes money and lasts.
Finding Out What Your Real Profit Margin Is
Let’s say you’re offering a $30 wooden phone case that was made by hand. That price seems fair, doesn’t it? But wait! You might be surprised at how much Amazon’s FBA fees change your real profit if you haven’t thought about them before.
For instance, let’s say your phone case is 8 ounces and is listed on Amazon under the “Media” area. Referral fees of about $4.50 (15%) and fulfillment fees of $3.50 (depending on storage length) might be added to an item that sells for $30. Now, your $30 offering has a $22 profit margin instead of $30.
Making Informed Inventory Decisions
When you know about FBA fees, you can make smart choices about your inventory management. For instance, if you know how much it costs to store bigger or bulkier things, you can make the most of your inventory and avoid spending money on storage that you don’t need.
You’re thinking about selling winter scarves that you knit by hand. Since it costs more to store big things, you might decide to only sell them during certain times of the year or in smaller amounts to save money on storage.
Identifying Profitable Products
When it comes to making money with FBA, not all goods are the same. By figuring out your fees, you can see which items have good profit margins after FBA costs are taken into account.
With this information, you can focus on selling things that could bring in more money. For example, you’re starting a line of jewelry that you made yourself.
If you consider the FBA fees for necklaces, bracelets, and earrings, you may find that earrings have a higher profit margin after FBA fees than necklaces because they are smaller and lighter. This lets you change the prices or focus on amazon advertising the earrings more to make the most money.
Planning for Promotions and Discounts
Getting ready for a deal or special offer? Don’t forget to think about the FBA fees! Knowing your costs will help you make a profit even if you lower the price you’re selling it for.
For instance, you want to sell your phone cases on Black Friday. Taking into account the fulfillment fee, the referral fee, and any possible discounts, you can set a price that makes you a profit while still attracting buyers.
Tips on How to Lower or Get Rid of Amazon FBA Fees
Automate Inventory Management to Avoid Overstocking
For example, the cost of keeping too much inventory on hand can hurt your business’s earnings. These costs usually include storing the goods, extra Amazon FBA fees like the aged inventory tax, opportunity costs, insurance, and possible losses from spoilage or shrinkage.
It is important to know that these costs go up dramatically the longer that unsold product stays in storage.
On the other hand, running out of stock can cause cash problems. There are clear costs associated with running out of stock, such as lower rankings, lost income, and the cost of faster air shipping.
But there are hidden costs below the surface, such as unhappy customers, less work getting done, and the money needed to handle backorders (orders that can’t be met right now because of a lack of stock).
Implement a Routine Amazon Inventory Cleanup
Clean up your Amazon inventory daily to keep it lean and effective. Start by going to Seller Central and clicking on “Manage Inventory Health.” This will take you to your Inventory Health report. Find and make a list of old products, giving more weight to items that cost more to store.
Then, make a plan for these things before the date that you need to clean up your collection. Keep in mind that Amazon checks its stock every month on the 15th to find things that have been in their FCs for more than a year.
Long-term storage fees for Amazon FBA can apply to old inventory, so it’s best to get rid of these things before the next assessment date to save money.
Think of creative ways to sell these goods that don’t move as quickly, like bundling them with your best-selling items or taking part in Lightning Deals to get more people to buy. Run advertising campaigns to get more people to look at these things, especially the ones that aren’t selling very well.
Use listing optimizations to improve your total sales performance and conversion rates. These tips will help you better handle old goods and boost your sell-through rates at the same time.
Use an Amazon Reimbursement Service Provider
With the help of refund service providers, it is possible to get back the money that Amazon owes. If Amazon says no, don’t think that’s the end of your claim.
You might want to work with a service provider like Seller Investigators (SI) that knows how to handle the complicated process.
Conclusion
Using Fulfilled By Amazon does cost money, as you can see. Many Amazon sellers like FBA because it helps them market their products better, gets items to customers faster, and sometimes even lowers the price, though not all sellers do.
You should find out how much FBA will cost before you sign up for the service, though, because every business and product is different.
Explore top tips and insights on how to manage inventory and minimize storage costs to enhance your Amazon business’s bottom line.
Learn the insider secrets to keeping your FBA storage fees low with Kenji ROI
