Knowing what Amazon fees to expect will allow you to always keep your profit margins in the green. In this Amazon seller fees calculator guide, we'll talk about all the Amazon seller fees to be aware of and the extra information you need.
Selling on Amazon can be highly lucrative for brands and businesses who understand how the platform works and all its fees.
We want you to fall under this category of businesses, and we aim to arm you with enough details to understand Amazon seller fees. Let's begin.
What Are Amazon Selling Fees to Be Aware Of?
Here are some of the Amazon seller fees to understand as you price your items to get positive profit margins. Knowing what fees to expect will ensure that you incorporate them into your selling price and keep your Amazon profit margins in the green.
1. Monthly Subscription or Per-Item Fees
The first thing to note when deciding to sell on Amazon is that you'll need to choose the Amazon seller plan you want. There are two types of seller accounts.
a). Individual Seller Account
This account type is for Amazon sellers who want to sell less than 40 units per month. Why? Because you won't pay a monthly subscription fee. Instead, you'll pay a per-item fee of $0.99 each time you make a sale.
With this type of account, you'll have access to a basic listing and a few management tools. You can choose to start with this account if you are new to selling on Amazon and want first to learn the platform.
You may also need to pay variable closing fees that range from $0.45 to $1.35.
b). Professional Seller Account
This Amazon seller account requires you to pay a monthly subscription fee of $39.99. However, you won't pay a per-item fee like with the Individual seller account.
The variable closing fees and referral fees range from 6% to 25%. The advantage of this Amazon seller account is that you'll have access to advanced Amazon selling tools. These tools will allow you to grow your business and brand.
If you plan to sell more than 40 units per month, this is your account.
2. Amazon Referral Fees
Think of the referral fee as a sort of "commission" you pay to Amazon for every sale you make. This Amazon fee is based on the product category your items fall under. Each category has a minimum referral fee.
The referral fee is often 15% of your selling price. You'll need to pay the greater of either the referral percentage or the per-item minimum referral fee of that category.
We've placed these Amazon seller fees second on our list because it applies whether you're using Fulfillment by Amazon (FBA) or not. In addition, these referral fees are often deducted from your Amazon account once you've made a sale.
Another thing to note is that these referral fees are not affected by the weight of your product like some other Amazon fees are.
3. Variable Closing Fees
These Amazon seller fees apply to specific categories such as books, videos, music, video games, DVDs, and consoles.
The specific amount varies depending on the category the products fall under, the shipping destination, and the shipping service.
4. Fulfillment Fees
When selling on Amazon, you'll need to decide whether you want your fulfillment to be done by Amazon or you'll do it yourself. Fulfillment by Merchant (FBM) is when you are in control of all of your handling and shipping processes.
This means that you'll store, pack, ship, and handle returns of your products yourself. Therefore, if you have the storage space, the time, and the energy to handle the process yourself, this is the way for you.
On the other hand, if you want Amazon to handle all of these processes, you'll need to go with Fulfillment by Amazon. The latter requires you to pay Amazon FBA fees that will cover the cost of these processes.
Several factors determine the amount of Amazon FBA fees you'll pay. These include:
- The weight of your product (the volumetric weight)
- Size of your product
- Channels you'll use to sell your products (either through Amazon or external sites)
Once you've factored in the weight and size of your products, they'll fall under one of these categories. Either the standard size or the oversize category. The category will determine the fulfillment fees you'll pay.
a). Standard Size
If your products weigh less than 20 pounds with dimensions of 18” x 14” x 8” when fully packed, they fall under the standard size category.
b). Oversize
On the other hand, if the weight and size of your products are above the ones stated above, they'll fall under the oversize category.
This means a volumetric weight of over 20 pounds and a dimension of over 18 inches on the longer size.
5. Monthly Storage Fees
These fees apply to you if you decide to go with Fulfillment by Amazon and have your inventory stored in an Amazon Fulfillment Center. You'll need to factor in these FBA fulfillment fees as they can affect your net profit.
These Fulfillment by Amazon fees are calculated per cubic foot. Therefore, the more storage space your inventory takes up, the more fees you'll need to pay. So, when do Amazon sellers pay these Fulfillment by Amazon fees?
Amazon charges these storage fees between the 7th and 15th day of the month that follows the one that the fee is applicable. For example, if you need to pay storage fees for the month of June, Amazon will charge you this fee between the 7th and 15th day of July.
a). Size of Product
One important thing to note when it comes to storage fees is that you'll pay more for standard-size products than you will for oversize products. Kind of ironic, right?
The reasoning behind this is that standard-size products require complex bins and shelving that are expensive. However, the product size tier will also determine the storage fees you pay.
More often than not, you'll find that your storage fees are lower if you have standard-size products than when you have oversize products. Again, this is because of the volume.
b). Time of the Year
Another factor that affects the storage fees is the time of year. For example, for the period between January to September, you'll pay $0.99 per cubic foot for your standard products and $o.78 per cubic foot for your oversize products.
For the period between October to December, you'll pay a storage fee of $3.63 per cubic foot for your standard-size products and $2.34 per cubic foot for your oversize products.
c). Long Term Storage Fees
The Amazon FBA long-term storage fee applies when your inventory remains in an Amazon Fulfillment Center for more than 365 days.
This monthly long-term storage fee (LTSF) is either $6.90 per cubic foot or $0.15 per unit, whichever is higher. This fee is calculated on the 15th day of each month.
Therefore, it would be wise to incorporate this cost if you are dealing with a high volume of products and are not sure how long it will take for you to complete your inventory.
How Can You Maximize Profitability?
In addition to being aware of the Amazon seller fees you'll encounter by using this e-commerce platform, you also need to have tips to help you increase profitability.
This multidimensional methodology allows you to determine profitability at the stock-keeping unit (SKU) level.
By applying the information we'll cover here, you'll be able to make informed business decisions when it comes to pricing, vendor negotiations, inventory management, restocking, and returns management.
However, before we begin, let's first define what the Amazon SKU is all about.
Amazon Stock-Keeping-Unit
The Amazon stock-keeping unit is your product identifier. In short, the Amazon SKU is the barcode that contains a unique string of numbers and letters and allows you to keep track of your stock.
You can find the Amazon SKU number in your Amazon Seller Central account. Let's look at how you can comfortably increase your profitability when selling on Amazon.
1. Keep Track of Your Costs
Knowing your costs at the SKU level allows you to never miss out on any hidden costs. However, even the smallest hidden costs can affect your bottom line and mess with your profit margin.
To avoid any leaks, let's look at some costs that should be properly articulated in your financial model.
a). Direct Costs
Direct costs include the cost per SKU and the shipping cost related to it. For the shipping costs, ensure that you consider both outbound shipping and inbound shipping.
b). Indirect Costs
These are the overhead costs and are often non-product related. Examples of such costs include utilities, payroll and benefits, bookkeeping, insurance, business travel, product samples, corporate business tax, and so on.
c). Amazon Fees
These are the fees we've looked at above including the FBA fee.
Other Amazon fees to keep in mind include commission on returned products, return shipping costs, inbound shipping fees, and returns disposal costs.
The return shipping costs include the cost of shipping from the customer to the Amazon fulfillment center and from the Amazon fulfillment center to you.
d). Returns Related Costs
The costs of handling returns once you receive them are crucial to consider because they can seriously affect your profit margin.
You need to know what write-down or write-off costs you're incurring by not selling these returned items as new-condition products.
Once you can account for each cost of running your business, the next step is to understand the overhead allocation cost per unit.
2. Calculate the Overhead Allocation Cost Per Unit
Determining the overhead allocation cost per unit is quite simple actually. What you need to do is to diligently calculate the indirect costs we've mentioned above over the past 12 months. Then go ahead and divide this by the number of units you've sold within that time period.
Feel free to refresh this calculation every six months. This overhead cost per item is how much you've spent on the sale of your item before you have purchased or sold it.
Between $1 to $3 in a good place to be in. If you find that your number is higher, it may be time to streamline your overhead costs.
3. Monitor Your Amazon Fees
To get information on all your Amazon fees, go to Amazon Seller Central > Reports > Payments > All Statements View. You should be able to check them based on one to two-week time frames.
If you are dealing with oversize products, your Amazon FBA fees may be higher. If you note any slow-moving SKUs, consider creating a strategy to move them. This will work to prevent you from racking up too much in long-term storage fees.
Another unique thing to consider when looking at the FBA fees is that not all of them will be SKU-specific. Therefore, once you've calculated your expenses by individual SKU, allocate the remaining costs across all units sold.
This approach will give you the minimum amount of information to monitor your costs month-to-month or even day-to-day.
Why Does the Model of Profitability by SKU Work?
Because it allows you to have a good grasp on your overhead allocation cost. This then ensures that you can properly apply that information to your current sales.
Without this information, it can be difficult to make prompt and informed changes to your inventory management, vendor negotiations, and product sourcing.
This data can also help you positively improve your future buying decisions and prevent you from repeating tactics that aren't working.
You can either track this information using detailed spreadsheets or hire third-party software to automate the process. If you are running a big successful business, the latter is likely a good idea to determine true profitability.
Profitability Leaks to Be Aware Of
Here are some areas where your Amazon business could be losing money without your knowledge.
a). Not receiving refunds
If you don't receive refunds from Amazon as an Amazon seller, it can affect your profit margins.
b). Lost or damaged returned items
When the customer returns the products, they sometimes don't make it to the seller. Therefore, you may end up losing money from lost or damaged goods that you had already invested in.
c). Incorrect SKU quantity from vendor
It's important to triple-check that you have received the exact quantity of products ordered from your vendor.
Whether it's an innocent mistake or deliberate action by your vendor, not receiving the quantity you were expecting can negatively impact your profit goals.
d). Incomplete Shipment
The advantage of using FBA is that you get to avoid the hustle of fulfilling the orders yourself. However, this specific advantage can be a double-edged sword, especially if there are errors along the way.
A common profitability leak occurs when part of your shipment gets damaged or lost on its way to one of Amazon's fulfillment centers.
Therefore, it's important that you confirm that the SKUs you've sent to the fulfillment center match up to what Amazon has received.
What Are ways to Increase Your Profit Margin As An Amazon Seller?
1. Reduce Returns
We've seen that returns are a major source of profitability leaks in your Amazon business. Therefore, striving to reduce returns can greatly impact your profit margin. However, the problem with returned products is that they rarely come back in good condition.
Some of the products may come back damaged or faulty. This can cause you to incur more costs to fix them or be unable to sell the items again. Another reason why you want to reduce returns is that returns hurt your brand's reputation.
Imagine a potential customer landing on your Amazon listing and seeing several other customers complaining about faulty products. They will likely leave your listing as fast as they came in.
So, how can you reduce returns? Here are a few tips to consider.
- Keep improving your product. If you see that most of your customers are complaining about the same thing, consider resolving it or improving your product. You can pass along this information to your vendor or manufacturer and work with them to improve the product.
- Use automated email services to contact customers who want to return the products. This can save your brand from the negative impact of negative reviews.
- Ensure that you get refunds owed to you by Amazon. Sometimes sellers don't always get refunds when the products get damaged or don't make it to the customers.
- Have an agreement in place with your vendor or suppliers for discounts on future orders if you get faulty products.
2. Improve Product Sourcing
The best part about doing your calculations is finding out your most profitable SKUs. With this information, you can now improve your future buying decisions to focus on profitable SKUs.
However, avoid stacking all your eggs in one basket and consider diversifying your portfolio. This will protect your Amazon business should something happen to your supplier or if that specific product line is discontinued.
3. Negotiate with Suppliers
After you have done your Amazon seller fees calculations, you can negotiate for a better cost per item with your supplier. If it makes sense to do so, consider even ordering more inventory to bring the cost per unit down.
Building a relationship with your supplier can allow you to get a better cost per item. A good idea would be to assess the type of relationship you have with your suppliers and the quality of products they give you.
You can switch suppliers if you question their quality or if the cost per item is too high for you. Assessing your relationship with suppliers will allow you to cut your losses where need be and build better relationships.
4. Courageously Make Bold Decisions
If something isn't working for you, you need to be quick to make pivotal decisions. The Pareto Principle (80/20 rule) applies to Amazon sellers.
This means that you'll find that the average Amazon seller makes 80% of their profits from 20% of their products. Therefore, you can have a successful business by focussing on the products that are bringing in the most revenue.
Being able to cut back on costly items will increase your profit. If the FBA fees and other fees don't justify the sales and profits you're making, it's time to move on to another product.
Consider liquidating your remaining stock and investing in profitable items.
Frequently Asked Questions About Amazon Seller Fees Calculator
1. What is the estimated fee per unit sold?
The estimated fee per unit sold is the tool that gives you a preview of the main fees for selling on Amazon when an SKU unit is sold.
This value can change and is only an estimate for your reference.
2. What Amazon fees are included in the estimated fee per unit sold?
The fees included in the fee per unit include the variable closing fees, referral fees, Amazon FBA fulfillment fees, fixed closing fees, fee discounts and remote fulfillment with FBA.
The Remote Fulfillment with FBA will show for the offers that are enrolled in this program.
3. How can you lower your Amazon referral fee?
There's no way to reduce referral fees as these are standard and set by Amazon. However, if you don't want to pay high referral fees, consider focussing on items in categories that have a low referral fee.
If you really want to sell specific products, but they have a high referral fee, consider selling them on another platform where the referral fees aren't as high.
4. Is selling on Amazon free?
No. To sell on Amazon, you'll need to create a seller account. You can choose either the individual seller account or the professional seller account, depending on your preferences and the size of your Amazon business.
If you choose the individual account, you'll need to pay a per-item fee of $0.99 for every item sold. On the other hand, the professional account will require you to pay a monthly fee of $39.99, but you won't pay the per-item fee.
You can use a good Amazon sales calculator to find the estimated number of sales of a certain item in a specific Amazon category.
