Cost of selling on Amazon

Amazon always stands out as a dominant force, providing a platform for millions of sellers to reach customers globally. However, the journey of an Amazon seller is not without its challenges, one of the most significant being understanding and managing the costs associated with selling on the platform. In this guide, we delve into the intricacies of Amazon seller fees to provide you with a clear understanding of how much it truly costs to be an Amazon seller.

Selling on Amazon can be a lucrative venture, but it’s crucial to understand the various fees associated with the platform to ensure profitability. From referral fees to fulfillment costs, Amazon seller fees can significantly impact your bottom line. In this guide, we’ll break down the key fees and changes sellers need to be aware of to navigate the e-commerce landscape successfully.

Sales Fees

When selling on Amazon, there are several sales fees to consider, including referral fees, closing fees, and administration fees for returned orders. These fees can vary depending on the category of the item being sold, making it essential to understand the specific costs involved.

Sales Fees

Referral Fee

The referral fee is the commission paid to Amazon for each item sold, typically ranging from 6% to 45% of the total sales price. However, certain categories, such as media products, have fixed referral fees, with media products incurring additional charges. Recent changes, effective January 15th, 2024, include reduced referral fees for apparel items priced under $20 and a decrease in fees for items priced under $15.

Referral Fee

Referral Fee

Closing Fee

In addition to the referral fee, sellers in media categories are charged a closing fee, typically a flat $1.80 per item. This fee, also known as the “variable” fee, was previously charged as a percentage of the sale price.

Refund Administration Fee

Amazon refunds the referral fee for returned orders, minus an administration fee of $5 or 20% of the referral fee, whichever is less. This fee applies when sellers refund customers for any order they received payment for.

Account/Subscription Fee

Amazon offers two types of seller accounts: individual and professional. While both account types allow sellers to list products and access seller support, professional accounts offer additional features, such as the ability to add multiple users, participate in global selling programs, and access Lightning Deals.

Fulfillment Fees

For sellers enrolled in Fulfillment by Amazon (FBA), Amazon handles the shipping, handling, and packaging of items stored in their warehouses. Sellers are charged fulfillment fees based on the size and weight of their products. Recent changes include new rate cards for standard-sized products and reduced fulfillment fees for standard-sized and large-bulky items, effective February 5th and April 15th, 2024, respectively.

Navigating Amazon seller fees is essential for sellers looking to maximize profits and optimize their selling strategies. By understanding these fees and recent changes, sellers can make informed decisions to ensure success on the platform.

Amazon has recently announced significant adjustments to its Fulfillment by Amazon (FBA) fee structure, which will impact sellers across various product categories. Here’s everything you need to know about these changes and how they might affect your business.

Introduction to the Changes

Effective February 5, 2024, Amazon has implemented several modifications to its FBA fee structure. These changes include adjustments to size tiers, shipping weights, and fulfillment fees for standard-sized, large bulky, and extra-large items. Notably, the small standard and large standard size tiers have been redefined, with new weight and dimensional criteria.

  • Inbound Placement Fees: Amazon introduced new fees for the inbound placement of inventory. These fees were designed to reflect the cost of distributing inventory to fulfillment centers closer to customers. By regionalizing its fulfillment center operations and expanding its same-day delivery network, Amazon aimed to speed up deliveries and lower costs. Sellers were given the option to pay reduced fees or even avoid them entirely based on their shipping strategies.

Inbound Placement Fees

Referral Fee

  • FBA Fee Adjustments: On average, a reduction of $0.20 per unit for standard-sized products and $0.61 per unit for Large Bulky-sized products will be implemented in FBA fulfillment fee rates. These adjusted fees will take effect from April 15, 2024, coinciding with the initiation of inbound placement fees. Additionally, products priced below $10 will maintain an extra discount of $0.77 on per-unit fees. Further details can be found on the FBA fulfillment fee rates page.

FBA Fee Adjustments

Storage Fees

Maintaining an optimal inventory level is essential for Amazon FBA sellers to minimize fulfillment and shipping costs. To incentivize healthy inventory levels, Amazon will introduce a low-inventory-level fee for standard-sized products with low demand, starting April 1st, 2024. This fee aims to encourage sellers to stock items with higher customer demand, thereby avoiding additional charges.

Storage Fees

Furthermore, starting April 1st, 2024, Amazon seller fees for monthly storage will be reduced during non-peak months for standard-sized products by an average of $0.09 per cubic foot. However, storage fees for non-standard-sized products will remain unchanged.

Amazon also plans to introduce more detailed fee tiers for the existing storage utilisation surcharge, primarily affecting professional sellers with larger inventories.

Storage Fees

Fulfillment and Shipping Fees

Fulfillment by Amazon (FBA) offers a range of services, including order picking, packaging, shipping, and customer service. The FBA fee structure varies based on factors such as product size, weight, quantity, and category. Sellers should note that items priced under $10 qualify for the Low-price FBA program, reducing fulfillment fees.

During the peak holiday season (Oct 15-Jan 14), FBA fees are slightly higher, necessitating careful planning for sellers.

Recent and upcoming changes to FBA fees include:

  • February 2024: Introduction of FBA discounts ranging from 4 cents to $1.32 per item for products shipping in their packaging via the Ships in Product Packaging program.
  • March 2024: Addition of an inbound placement service fee averaging 27 cents per unit for standard items and $1.58 per unit for large, bulky items. Sellers can mitigate this fee by distributing inventory across multiple Amazon warehouses.
  • April 2024: Decrease in FBA fees by an average of 20 cents per unit for standard items and 61 cents per unit for larger items. Introduction of a new low-inventory-level fee for standard items with consistently low inventory relative to sales. Reduction of non-peak storage fees by an average of 9 cents per cubic foot/month for all standard items.

Inbound & Outbound Placement Service Fee

Inbound fees refer to the charges imposed by Amazon on sellers for utilising the company’s fulfillment services. Commencing from March 1st, 2024, Amazon introduced an FBA inbound placement service fee applicable to standard and large-bulky-sized items. This fee accounts for the distribution cost of sellers’ inventory to fulfillment centers located closer to buyers.

Furthermore, Amazon now distinguishes between inbound and outbound requirements, leading to a revision of outbound fees. While outbound fees are being reduced, the rate card is becoming more detailed for standard-sized products. Additionally, the existing structure and eligibility criteria for non-standard-sized products are being revised, introducing Large Bulky and Extra-Large size tiers.

Below are the new inbound placement service fees:

Inbound & Outbound Placement Service Fee

Inbound & Outbound Placement Service Fee

Ships in Product Packaging (SIPP) Discount

The SIPP program allows sellers to test and qualify their products for shipping to customers using the seller’s brand packaging instead of Amazon’s. This offers sellers an opportunity to enhance the customer experience, potentially boosting sales.

To encourage cost savings when products can be shipped in their existing packaging, Amazon offers a fulfillment fee discount ranging from $0.04 to $1.32, depending on the item’s size and weight, for items enrolled in the SIPP program.

Fulfillment by Merchant (FBM)

With Amazon FBM, sellers handle the storage, packing, and shipping of their products without assistance from Amazon. While there are no shipping or fulfillment fees for FBM sellers, they must consider factors like inventory storage, packaging materials, and shipping logistics, potentially requiring additional resources.

However, lacking the Prime badge associated with FBA, FBM may not be as advantageous in terms of sales.

Seller-Fulfilled Prime (SFP)

Sellers opting for Seller-Fulfilled Prime (SFP) are responsible for storing, packing, and shipping their products, akin to FBM. However, they must adhere to Amazon’s packaging and delivery guidelines to qualify for the Prime program.

Amazon charges a 2% fee per SFP order for the privilege of displaying the Prime badge. This fee is added to fulfillment, shipping expenses, and other Amazon seller fees, prompting sellers to evaluate their selling strategy. SFP users must meet requirements such as one-day and two-day Prime delivery, free standard shipping, and free returns on eligible items.

To enroll in the SFP program, sellers must fulfill certain criteria, including a minimum of 100 self-fulfilled packages using FBM and maintaining a low order defect rate.

Low-Level Inventory Fee

Amazon is set to introduce a new fee called the low-inventory-level fee for standard-sized products starting April 1st, 2024. This fee is applicable only if sellers maintain consistently low inventory levels relative to their unit sales. Insufficient inventory hampers Amazon’s distribution efficiency, leading to longer delivery times and increased shipping costs. However, sellers can easily avoid this fee by ensuring they maintain at least four weeks’ worth of inventory relative to their sales volume.

Shipping Fees

Shipping fees apply to all self-fulfilled orders through Amazon, particularly for media products like books, music, DVDs, software, and more sold by professionals. These fees also extend to products sold by individuals, not limited to media items. Amazon determines these rates based on the product category and selected shipping service.

It’s important to note that sellers are charged for fulfillment, storage, optional services, and selling fees for all Amazon-fulfilled orders.

Miscellaneous Amazon seller fees

Closing Fees

In addition to the referral fee, all media items sold on Amazon incur a closing fee of $1.80 per item.

High-Volume Listing Fee

Sellers with extensive inventories—100,000 listed products or more—are subject to an additional monthly fee of 0.005 cents per qualifying item. This fee aligns with the timing of FBA storage fees, so sellers should be vigilant, especially if they have substantial inventory on Amazon.

Rental Book Service Fee

Sellers renting textbooks on Amazon must pay a $5 rental book service fee for each textbook sold. Similar to referral fees, these rental book service fees are deducted upon each book purchase, alleviating the need for upfront payment.

Returns Processing Fee

Effective June 1st, 2024, a returns processing fee will be introduced for high-return rate products across all Amazon categories except apparel and shoes. This fee is applied to products with high return rates, aiming to offset the costs associated with processing returns and managing inventory.

Wrapping Up!

The landscape of selling on Amazon entails understanding and managing various fees associated with different aspects of the platform. From sales fees like referral and closing fees to fulfillment fees for FBA sellers, each fee serves a specific purpose in facilitating the selling process and maintaining Amazon’s operational efficiency.

One of the critical considerations for sellers is the balance between the costs incurred and the potential profitability of their ventures. While Amazon offers a vast customer base and convenient services through programs like FBA, sellers must carefully evaluate the fees involved to ensure their business remains viable and profitable.

The recent updates and changes to Amazon’s fee structure, such as the introduction of low-inventory-level fees and revisions to fulfillment fees, underscore the dynamic nature of e-commerce and the need for sellers to stay informed and adaptable.

Moreover, sellers have alternatives like Fulfillment by Merchant (FBM) and Seller-Fulfilled Prime (SFP), each with its own set of advantages and considerations. While FBM offers more control over the fulfillment process, SFP provides the opportunity to leverage the Prime badge and tap into Amazon’s loyal customer base, albeit with additional fees and stringent requirements.

In essence, successfully selling on Amazon requires a comprehensive understanding of the fee structure, careful planning, and strategic decision-making to optimize profitability while delivering value to customers. By staying informed about updates, managing inventory effectively, and leveraging available resources, sellers can navigate the complexities of Amazon’s fee ecosystem and build thriving businesses on the platform.

Maximizing Value as an Amazon Seller

While understanding and managing Amazon seller fees is crucial, it’s equally important for sellers to maximize the value they receive from the platform. Here are some tips for optimizing your selling experience on Amazon:

  1. Optimize Inventory Management: Maintain adequate inventory levels to avoid additional fees while ensuring timely fulfillment of customer orders.
  2. Leverage Fulfillment Services///: Consider utilizing Fulfillment by Amazon (FBA) to benefit from reduced fulfillment fees, streamlined logistics, and access to Amazon’s vast customer base.
  3. Monitor Fee Adjustments: Stay informed about fee adjustments and updates to Amazon programs to capitalize on cost-saving opportunities and maximize profitability.
  4. Focus on Product Selection: Identify high-demand product categories and leverage programs like the US FBA New Selection program to expand your product offerings and drive sales.
  5. Utilize Customer Feedback: Encourage customer reviews and feedback to enhance your product listings, build trust with potential buyers, and improve your overall selling performance.

Additional Considerations for Amazon Sellers

In addition to understanding the core fee structure and optimizing operations, there are several other factors for Amazon sellers to consider to enhance their success and profitability on the platform:

  1. Invest in Marketing and Advertising
    While Amazon provides a vast marketplace for sellers to showcase their products, investing in marketing and advertising can significantly boost visibility and sales. Utilize Amazon’s advertising platform, including Sponsored Products, Sponsored Brands, and Amazon DSP, to target relevant audiences and drive traffic to your product listings.
  2. Monitor Competition and Pricing
    Stay vigilant of competitor activity and pricing trends within your product categories. By monitoring competitor pricing, you can adjust your pricing strategy accordingly to remain competitive while maintaining profitability. Automated repricing tools can help you stay agile in dynamic market environments.
  3. Optimize Product Listings
    Optimize your product listings with high-quality images, compelling product descriptions, and relevant keywords to improve visibility and conversion rates. Use tools like Amazon’s A9 algorithm and third-party keyword research tools to identify and incorporate relevant keywords into your listings.
  4. Provide Exceptional Customer Service
    Exceptional customer service is paramount to success on Amazon. Promptly respond to customer inquiries and address any issues or concerns to maintain positive seller feedback and ratings. Positive reviews and ratings can significantly impact your product rankings and sales performance.
  5. Stay Compliant with Amazon Policies
    Adhere to Amazon’s policies and guidelines to avoid penalties or suspension of your seller account. Stay informed about policy updates and ensure compliance with requirements related to product authenticity, product condition, and customer service standards.
  6. Diversify Sales Channels
    While Amazon provides a lucrative platform for sellers, diversifying your sales channels can help mitigate risks associated with relying solely on one marketplace. Explore opportunities to sell through your e-commerce website, other online marketplaces, or brick-and-mortar retail channels to reach a broader audience.
  7. Continuously Evaluate Performance
    Regularly analyze your sales data, performance metrics, and customer feedback to identify areas for improvement and optimization. Use data-driven insights to refine your strategies, identify growth opportunities, and adapt to evolving market trends.

Wrapping up while Embracing Opportunities for Success

Navigating the costs of selling on Amazon requires careful consideration, strategic planning, and a proactive approach to maximizing value and profitability. By understanding Amazon’s fee structure, leveraging cost-saving opportunities, and implementing best practices in marketing, customer service, and optimization, sellers can position themselves for long-term success on the platform. Embrace growth opportunities, stay adaptable in a competitive marketplace, and continuously strive to deliver exceptional experiences for customers. With dedication and perseverance, Amazon sellers can thrive and prosper in the ever-evolving world of e-commerce.