Everything You Need To Know About Amazon FBA Fees
Selling on Amazon has become a staple for many businesses looking to maximize revenue. Dropshipping has emerged as a great way for many entrepreneurs to sell online without worrying about physical inventory. Amazon is a world leader in eCommerce with various brands taking advantage of the user-friendly selling platform.
Fees can become a concern when selling thousands of units of a product monthly. Amazon FBA fees or Fulfillment by Amazon fees need to be clearly understood for a variety of reasons. Setting prices for a particular margin is one of the reasons sellers need to comprehend the fee structure. Shipping products to Amazon cuts the workload for many entrepreneurs monthly.
Shipping one product might not seem like a big deal but this changes as the order number increases. Errors do happen when individuals take on a huge task of shipping thousands of orders. Amazon does this regularly so the chance of error decreases dramatically. Amazon handling this not only reduces stress but ensures a quality process of packing, shipping, and storage for any number of products.
Positive Aspects of the Fulfillment by Amazon Program
Partnering with a company like Amazon allows a business of any size to reap the benefits of the massive infrastructure Amazon has created. The ability to scale a business cannot be understated as worldwide sales will grow nearly any business with products in demand. The aspect of Amazon handling customer service is just another positive feature of the FBA program. With thousands of products sold, there could be a massive number of emails of customers that expect a product to arrive within hours.
The shipping fleet that Amazon has compiled will also allow a customer to receive the product in a timely fashion. Free shipping being incorporated with certain Amazon programs adds another aspect of convenience and keeps the customer experience high-quality. Amazon has the trust of a majority of consumers so the FBA program almost immediately legitimizes a company selling a product.
Scaling a business becomes a nightmare in some circumstances as storing thousands of products creates an automatic overhead cost. Storing products with Amazon not only drops fixed prices monthly but also ensures the security of the products. The fees, when compared to the benefits, seem more than reasonable as Amazon wants to sell as many products as possible. Most fees are only charged once a product has been sold rather than a fixed-price monthly.
There is a misconception that it takes quite a bit of experience in eCommerce to start selling on Amazon. This could not be further from the truth as the dropshipping community has highlighted. Plenty of sellers with little to no experience have sold thousands of items on Amazon and other eCommerce platforms. The trick of the trade is picking the right product that not only has demand but also a high profit margin.
T-shirts are a great example of a product with great margins and will not be very expensive to store at a fulfillment center. Fees do change during different times of the year due to the immense influx of sales that Amazon sees during the holidays. In 2019, the holiday season was the most successful of all time for Amazon leading their stock to skyrocket after their earnings report.
The main advantage of selling using the FBA method is that of not worrying about certain details of a sale. This allows a company or individual to concentrate on other areas of the business. Online marketing is imperative if a seller wants their products to be listed at the top of Amazon’s search results. Facebook ads do very well in terms of ROI for many online sellers as they are targets and relatively inexpensive.
Another perk of being associated with Amazon is that over half of those that are looking for an item online search for it on Amazon first. With nearly 100 million Amazon Prime members the amount of traffic that the website sees daily is nothing short of incredible.
The ability to expand an eCommerce business or any business that sells online is more than possible with FBA. Figuring out the right marketing methods can allow a business to start selling other items. Once you have success selling on Amazon the process becomes far simpler. Having a top-selling item can generate extreme amounts of revenue but it is important to stay on top of the order if not utilizing FBA.
With Amazon FBA fees the items that are being sold will be at the top when compared to those without an Amazon Prime logo. Content marketing needs to be stressed to rank items being sold. There are large amounts of money that are put into marketing for eCommerce so an efficient strategy is required.
Online support by Amazon 24 hours a day 365 days a year. The ability to answer a question about a product in a matter of minutes creates a far better customer experience. If a customer does not have any support, they are not likely to purchase an item that they are not completely sure about.
With Amazon’s reasonable return policy these fears are also quelled when compared to other eCommerce websites. Even clothes that used to be a staple of retail stores can be returned. Convenience is what people are looking for when shopping online and Amazon delivers. Clear product descriptions and a sound marketing strategy can allow a person to begin selling in a matter of days.
Finding out how much you will be paying is quite easy with an Amazon FBA cost calculator. Different tools will allow a seller to further analyze products and marketing tactics.
The Different Types of FBA Fees
The commission that is paid to Amazon for each item that is sold is the referral fees. This is a fixed rate with most fees back 15 percent or less. You do not pay these fees until you have sold a product which is something to keep in mind.
The referral fees depend on the type of items that a company or individual is selling. Below are highlights of these referral fees broken down into various categories:
- Amazon related devices and accessories is a 45 percent referral fee.
- Baby products have just an 8 percent fee if the total price is under $10. If the price is over $10 this referral fee goes up to 15 percent.
- Books both physical and digital have a 15 percent referral fee.
- Cameras, cell phones, and other electronics have an 8 percent fee while DVDs boast a 15 percent fee.
- Furniture is a 15 percent fee when under $200 and a 10 percent fee for purchases over $200.
- Mattresses are a special case as regardless of the sale price, type, size, or manufacturer will be charged a 15 percent referral fee.
- Home, garden, and kitchen supplies incur a 15 percent fee. Appliances have a 15 percent fee as well but if the cost is over $300 this fee drops to 8 percent of the sale price.
- Personal computers have quite a low referral fee at only 6 percent.
- Office products, software, and video games come with a 15 percent referral fee. Video game consoles on have an 8 percent fee regardless of manufacturer or price.
- Automotive=based products are charged a 12 percent fee unless the product is a tire which incurs a 10 percent fee.
- Beauty products have an 8 percent fee if under $10 and a 15 percent fee if over $10. Clothing and other accessories have a flat rate of 17 percent in terms of referral fees.
- Gift cards have quite a large referral fee at 20 percent.
- Groceries incur an 8 percent fee if the sales price is under $15 and 15 percent if over $15.
- Jewelry is charged a 20 percent referral fee up to $250 where the percentage drops to 5 percent if over $250.
With the differences in fees, it is important to select products that have a high profit margin. The last thing a company wants to do is be charged 20 percent when a few dollars bump in price could drop the fee dramatically. For sellers looking to move just a few products per month for supplemental income paying 99 cents per item will be the best option. If you opt for the subscription route Amazon will charge the account monthly from a running balance or deduct the payment from the credit card associated with the account.
Refund Administration Fees
There is a chance that a buyer is extremely unhappy with the product they had shipped to them. This could be due to error or the quality of the product did not meet their expectations. Requesting refunds is a common practice but there is a fee associated with this. A $5 flat fee can be paid or 20 percent of the refunded amount. Amazon will opt for the less expensive option due to being extremely seller-friendly.
Fees that Pertain Only to FBA Sellers
FBA sellers do not have to worry about shipping products or packaging them which can be an arduous process. The size and weight will determine how much the FBA fees will be for particular products. The labor that is done by the Amazon fulfillment team will be covered by these fees as well.
Storage fees for your products in the fulfillment center are charged monthly or long-term. For seasonal products, it might be wise to go on a month by month basis. Products that are purchased throughout the year should enter into a long-term agreement for the storage and protection of their inventory.
If there is leftover inventory at the end of a month Amazon will charge the storage fee. The fee can come out of an account balance but for accounts, with no funds, it will be charged to your credit card. Below are the monthly storage fees for FBA sellers to keep inventory at an Amazon fulfillment center:
- Amazon does a cleanup on the 15th of the month and takes the current inventory. The data collected will show what products are available and which have been there for over 6 months.
- For those items that have been there for 6 months or longer, a fee of $6.90 per cubic foot of storage space used is charged.
- Products that have been in an Amazon fulfillment center for over a year will result in a $0.15 charge per unit. Sellers that have large amounts of inventory stored at these centers might want to reconsider it if they simply are not selling at a high rate.
- Fees do go up during busy seasons to push sellers to remove inventory that is not selling or is selling at a far slower rate than anticipated.
FBM Seller Fees
Fulfilled by Merchant or FBM sellers handle the shipping, packaging, and storage of products in-house. The costs of this are usually higher than FBA sellers with additional costs. Customer service reps are included in these additional costs as customer service then has to be handled by the merchant. The staff needed to handle a large volume of shipping and packing products will also be an additional cost that FBA sellers do not have to worry about.
Labor costs are always going to play a factor in the decision-making process of a business. With FBA the costs are fixed and no additional staff needs to be hired even during the times of the year where sales ramp up. Amazon has the labor force to help which can make selling online almost like passive income if you have an efficient Amazon product marketing plan.
Who Can Benefit From The Fulfillment By Amazon Program?
Being able to sell a product on the largest eCommerce platform benefits quite a variety of sellers. Below are a few examples and how they benefit from the FBA program Amazon offers:
- Retail stores can expand their offering around the country and the world. Paying the FBA Amazon fees allows for management to handle other aspects of the business. Storage of items with Amazon is covered by the fee so this reduces the time that is wasted looking for potential warehouses.
- Other eCommerce stores will benefit simply from the exposure of having products listed on Amazon. The one job that is left up to the individual selling is how they will handle the digital marketing aspect of the product.
- Entrepreneurs will see vast benefits as there is plenty to worry about when starting a business, Amazon simply makes the selling process seamless. Gathering selling data is also very intuitive so an entrepreneur can easily track overall sales and how marketing techniques are delivering in terms of ROI.
Costs always need to be monitored as there are fees like that of the referral fee which is generally 15 percent. Factoring these fees into pricing might seem difficult but once you research you will find the fees are more than reasonable. The fact that customers can receive items quickly due to Prime shipping is another bonus.
The Amazon FBA fee as noted above is more than reasonable. Even if a profit margin does decrease slightly the volume of sales is sure to make up for it. There is a professional plan for sellers that are looking to ramp up the volume which costs a small monthly fee of $39.99 or for those selling less it is $0.99 per item sold.
What You Will Need To Handle When Utilizing FBA
The first item of business is going to be deciding what items you will want to sell. There are quite a few niche products that do extremely well online while others do not have the same demand.
If you are working with a wholesaler you need to make sure they are reliable. The last thing an online seller wants is a few bad reviews to directly impact their sales. Late shipments or terrible communication can lead customers to demand refunds or cancel their orders. The importance of inventory management whether you are working with a wholesaler or not is also of utmost importance.
You also have to keep in mind that certain products are not allowed to be sold on Amazon. CBD products cannot be sold as they have to be labeled as hemp due to the past of CBD and cannabis in general. Even something as simple as a specific makeup that gains popularity can generate millions of sales.
Once you have established the products that you want to sell it is time to start setting up your Amazon store. Plenty of people use platforms like Shopify to setup multichannel eCommerce stores. The proper research needs to be done as many of these platforms are effective yet not incredibly intuitive to set up.
Your seller information should be available on the site if someone wants to reach out to modify an order or have it sent to another address. If not using FBA you are going to need to hire an answering service. With worldwide eCommerce sales, a seller does not want to be receiving calls on their personal line during all hours of the night. FBA fees are well-worth this aspect alone so this is a detail to keep in mind when deciding between fulfillment by Amazon and fulfillment by the merchant.
The product copy is more important than most sellers imagine with many sellers rushing product descriptions simply to get the product listing live. Hiring a professional copywriter might be best as these writers will understand how to convey what a product offers in a clear and concise way. The last thing a seller wants is an important feature of a product to be overlooked and bought from a seller that put time/effort into the product copy.
Marketing being done is going to generate sales so those with marketing backgrounds already have an advantage. A common marketing strategy is the utilization of Facebook ads. For those that do not understand how to create the ads or what it will cost, there are plenty of freelancers available online that could be of assistance. Tracking the ROI on these ads is important as some marketing tactics work for specific products but fail for products in another niche.
Content marketing could be the most difficult portion of selling online. There is intense competition in eCommerce due to the world of business becoming far more global. Ranking at the top of search engine product results is going to take time, patience, and quite a bit of writing.
The first step is doing the appropriate keyword research for the products that are being sold. Targeting the wrong keywords not only will not have the desired impact when marketing, but it can also be a waste of time and money. Placing content on websites can be a tricky venture as many bloggers and website administrators request payment. Payment shouldn’t be made to publish on a website that has little to no organic traffic.
Sites with large amounts of organic traffic can generate massive amounts of traffic to your product’s page on Amazon. Sites like Huffington Post and Forbes.com are going to be far more difficult to have content published there due to the numerous pitches. Email outreach is going to be the lifeblood of the content marketing approach. Custom pitches work far better than generic pitches due to the massive need/importance of guest posting with the goal of getting a backlink.
Influencer marketing can be huge for a company trying to push the sales of a particular product on Amazon. Some influencers have loyal followers/readers/listeners that will buy a product with their personal endorsement. Finding these influencers is not difficult as there are platforms that connect brands and influencers that also provide results an influencer has garnered for a particular campaign. This will not work for all products so doing a few test campaigns on a small scale is advised.
The FBA Amazon fee is a great investment for a company wanting to grow their business. The lack of need for storage also reduces costs in other areas. Amazon is a trusted eCommerce juggernaut that can help take sales to the next level long-term.