One problem that many Amazon sellers face is calculating the Amazon fba fees when selling in the Amazon. Many new sellers ignore this issue and choose to sell their items at very low margins, which ultimately leads to the failure of their Amazon business. Only with a clear understanding of Amazon selling fees can you properly select products to sell or set the right price for your products. This is the first step towards success.
We have to pay a lot of fees when we run an Amazon store to sell goods. Today’s article focuses on the costs of using Amazon FBA services. In the following section, I will introduce several fees involved in Amazon FBA business and teach you how to calculate each fee according to your product category. There are also some tips and tricks to reduce unnecessary expenses that can help many new sellers reduce the initial cost burden.
- A brief introduction of Amazon FBA.
- Amazon fulfillment fee.
- Amazon referral fee.
- The monthly inventory storage fee.
- Long-term storage fees.
- Removal order fees.
- Returns processing fee.
- Refund administration fees.
- Unplanned service fee.
- Two tips to reduce Amazon FBA fees.
1. A brief introduction of Amazon FBA
Amazon FBA means Fulfillment by Amazon, which is a service model provided by Amazon. Amazon sellers can list their products and sell them after registering their stores. Once a customer places an order, Amazon will provide a range of services, including order processing, shipping, picking and packing, and providing customer support.
Amazon FBA solves the problem of logistics timeliness. Your customers can receive the goods within two days, which is more convenient and efficient than running your own warehouse and goods.
If you want to profit from Amazon FBA, you still need to understand the following kinds of costs that need to be involved in Amazon FBA fees
2. Amazon fulfillment fee
The fulfillment service includes order handling, shipment, pick and pack, and customer support. So, the fulfillment fee is calculated as follows.
Total Fulfillment fees = order handling fees + picking and packing fees + weigh handling fees.
Charges are based on the size and weight of the item, there are several fixed-size standards. You need to find a standard based on the size of the product, and use this standard as the basis for your calculation. Note that when you choose the criteria, you need to make your product meet all the criteria. Whether it’s weight or any dimension that exceeds, you will need to choose a larger standard.
First, determine the product category (apparel or non-apparel) and product size tier (standard or oversize). If your products can weigh fewer than 20 pounds after packaging and their dimension doesn’t beyond the size 18 x 14x 8 inches, then these products are standard size. Otherwise, your products would be oversize tier.
Then use the tables below to determine which fee will apply.
You can see that there are finer criteria under both levels, such as Standard-size products also can be divided into two kinds small standard-size and five kinds of large standard-size for both non-apparel items and apparel items.
To calculate how much you should pay for your products’ fulfillment fees, you should choose the most desirable criteria. Remember, the weight is calculated according to the shipping weight.
Such as if I have a T-shirt whose dimensions are 8.5 x 4.8 x 1inches, its unit weight is 6.08oz and shipping weight is 11oz, then I should choose the fourth level under apparel items (standard-size).
The other thing to say is if your product is a dangerous product, you need to adopt a new standard. Dangerous goods require special handling and hazardous materials storage. The following tables will give you some reference.
3. Amazon referral fee
Every time you sell a product Amazon charges you an Amazon referral fee, so it also is known as a selling fee. It’s kind of like a marketing fee because if you set up a website to sell products you still need to pay a lot of money on marketing.
Typically, this fee is calculated as a percentage of the price of the product you sell, but Amazon also has a minimum cost. Generally speaking, the recommendation fee is 15% of the selling price, and it will be adjusted according to the type of products you sell. The maximum is 45%, and the minimum is 6%.
You can check the newest referral fee you need to pay for various types of products by Selling on Amazon Fee Schedule. I will put the regulations up to August 2020 in the following table.
Note that no matter whether you use FBM or Amazon FBA, the referral fee must be paid. However, if you use FBM, your referral fee should be calculated based on the selling price plus the shipping cost. I will illustrate with the following formula:
Amazon referral fee (FBA)= product sale price x 15%
Amazon referral fee (FBM)= (product sale price + shipping cost) x 15%
Another thing I need to mention is that the referral fee is related to your actual selling price. For example, if you sell a cup for $20, but you design a 20% discount to attract more people to place orders, then the referral fee is calculated based on the actual price of $16 you sold. So don’t worry about losing money because of referral fees when designing discounts or discounts.
Amazon also has a minimum $1 referral fee for almost all categories. Take an example, if you sold an item for $2 and you need to pay 15% referral fees, but it is lower than $1, you have to pay $1 for per this item.
But the minimum referral fee does not apply to all categories. Game console and video games, in these two categories, Amazon will only charge you for a percentage of the sale price.
Some of you may find it puzzling, or even unworthy, that Amazon charges such a high percentage. But in fact, Amazon provides you a selling platform that doesn’t need to pay too much construction cost.
4. Monthly inventory storage fee
As the name suggests, you pay Amazon monthly for your product storage and using Amazon warehouses.
Two things decide your Amazon storage fees. The first is the size category of the product, as well as the fulfillment fee, the storage fee differs from standard-size products and oversize products. Fees are charged by cubic foot, so oversize items may charge more than standard-size items. The second is the season, during the holiday months of October to December Amazon charges more.
MonthStandard-sizeOversizeJanuary – September$0.75 per cubic foot$0.48 per cubic footOctober – December$2.40 per cubic foot$1.20 per cubic foot
Monthly inventory storage fees will be charged between the 7th and 15th day of the month following the month for which the fee applies. You can check your inventory storage fees in next month’s payment report.
Storage charges for dangerous goods and other special goods will also be higher. You can use the look up an ASIN tool to check the classification status of your ASIN and whether you need to be in the FBA Dangerous Goods program to sell it. More details can be confirmed through the Dangerous Goods identification guide.
MonthStandard-sizeOversizeJanuary – September$0.99 per cubic foot$0.78 per cubic footOctober – December$3.63 per cubic foot$2.43 per cubic foot
5. Long-term storage fee
One of the most important things I want to mention is that the products stored in the Amazon logistics center for more than one year, a long-term storage fee will be charged in addition to the monthly storage fee.
A long-term storage fee of $6.90 per cubic foot or $0.15 per unit (whichever is the greater) will be charged by month for inventory stored at the distribution center for more than 365 days. It will be calculated on the 15th day of each month. The charging policies examples are shown in the table below.
It’s better to control your inventory among 365 days, you can check your inventory storage time by ASIN. Only those items stored for more than 365 days will be charged according to a first-in, first-out (FIFO) basis.
So if you want to lower your FBA fees, one thing you must do is to avoid long time storage. Or you can actively manage your older inventory by submitting a removal order and setting up automated removals for inventory subject to long-term storage fees. So that your inventory will be removed before the cleanup date to avoid the long-term storage fees.
If the cost of the product is low and there is a lot of inventory, you can sell off your products to reduce the cost of a large inventory. At the same time, the referral fee will be reduced when you sell at a discount, which can reduce the loss caused by high referral fee and long-term inventory penalty while reducing the inventory.
6. Removal order fees
One difference of the Amazon fulfillment center is that you need to pay a removal fee except your warehouse storage costs. if you want to put your inventory or unsold inventory shipped from Amazon or give up the stock altogether, Amazon will charge removal fees.
So if you have a large amount of inventory that is about to be penalized for long-term storage, and you want to remove the goods from the warehouse to avoid the penalty, it may not be the best choice, as the removal fee will still make you suffer from the loss.
The wisest thing is not to overstock, but if you have to deal with this problem, you may need to calculate costs based on how much stock you have left. Removal fees are charged per item removed. The removal fee is also determined by the size and weight of the goods, as shown in the following table.
Size tierShipping weightRemoval/disposal fee per unitStandard size0 to 0.5 lb$0.250.5+ to 1.0 lb$0.31.0+ to 2.0 lb$0.35More than 2 lb$0.40 + $0.20/lb above first 2 lbOversize and special handling items*0 to 1.0 lb$0.61.0+ to 2.0 lb$0.72.0+ to 4.0 lb$0.94.0+ to 10.0 lb$1.45More than 10.0 lb$1.90 + $0.20/lb above first 10 lb
Typically, removal orders are fulfilled in 14 business days. However, removal order processing may take 30 business days or more during the holiday season and peak removal periods.
7. Returns processing fee
If customers buy fashion category goods include apparel, watches, jewelry, shoes, handbags & sunglasses, luggage. they can use the 30-day free return service to return goods. Amazon’s free returns to customers can help build customer trust and encourages purchases. At this time, sellers will have to bear the handling charge of returning the goods except where the reason for the return is one for which Amazon takes responsibility in accordance with the FBA lost and damaged inventory reimbursement policy.
The number of poundage commonly also is the package size that presses returned goods decides. This fee is equal to the fulfillment fees for per unit. If returned packages need to be repackaged and resold, Amazon charges a repackaging fee.
8. Refund administration fee
If you refund a paid order to a customer, Amazon will refund you the referral fee you paid for the product, but charge an applicable refund management fee. (20% of the applicable referral fee no lesser than $5).
For example, if you refund a customer the $10.00 total sales price of an item in a category with a 15% referral fee, your Refund Administration Fee will be $0.30 ($10.00 x 15% referral fee = $1.50, $1.50 x 20%= $0.30).
9. Unplanned service fee
You need to be prepared to take your labeled inventory to the Amazon fulfillment center, which requires all items to be labeled and barcoded to certain specifications, or else you’ll be charged about 20 cents per item for the labeling fee.
10. Two tips to reduce Amazon FBA fees
First and foremost, choose the right and suitable products to sell. As you can see about all kinds of Amazon FBA fees, many of them related to size and weight. If you can choose some high sell value but small size and light products, you will save more fulfillment costs. Especially the new sellers should avoid large size products as possible as they can.
Storage fees are based on weight and size and not price, so it’s better to choose an item with a high sale price because if two products are of similar size and weight, their Amazon FBA costs will be similar too. For instance, if an item with a low price is the same weight and size as an item with a high price, Amazon FBA costs will be the same, but it’s harder for you to make a profit on the item with a low price.
Secondly, You need to constantly monitor your inventory. It is important to reduce Amazon FBA costs by avoiding unnecessary expenses, such as long-term storage fees, or clearance fees. This not only requires you to keep an eye on the number of units in stock for each product, but it also requires you to have a rough idea of how many units will be sold over the next period. In particular, some products are sold with obvious seasonality.
Amazon’s Seller center offers the Inventory Performance Dashboard, which you can use the dashboard to monitor your inventory activity, as well as receive suggestions on making better use of your inventory and its management.
There may be many other ways to save Amazon FBA fees, but today I only give the above two suggestions, hoping to help you better understand Amazon FBA charging rules.
Thank you for reading and you can share it with your friends who need it. Remember to stay tuned on our website, I will bring you more knowledge about Amazon business.
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