Starting a business on Amazon is now much easier thanks to the Fulfillment by Amazon program. With FBA, anyone can sell merchandise on AMZ without having to worry about fulfillment.
Fulfillment by Amazon is a service that Amazon offers to third-party sellers. In this program, AMZ is responsible for order warehousing and fulfillment. Third-party sellers ship their inventory to a fulfillment center. AMZ then picks, packs, and ships the orders to customers. Amazon also handles customer service and returns on behalf of the seller. Want to join the millions of sellers who use Fulfillment by Amazon for their business? First you need to understand that the service is not free.
The question on your mind right now is probably,“How much does the FBA charge?And this is an important question. You need to know the costs involved so that you can profitably price your items. The good news is that we have answers. In this article.
What are the Amazon FBA fees?
AMZ charges for the services it provides to third-party sellers under its FBA program. They typically cover the cost of storing, packing, and shipping the inventory. They also provide customer service and manage returns on your behalf.
There are two main fees that sellers must pay: inventory storage and processing fees.
- compliance rates: This category covers the costs of picking and packing customer orders. It also covers shipping and handling, as well as customer service and product returns.
- Inventory Storage Fees:This category covers the costs of storing your products in a Fulfillment Center.
An analysis of compliance rates
Processing fees are charged per unit. Unlike reference rates, there is noFBA Fee Percentagesoby category. FBA fulfillment fees are calculated based on the weight and size of a product shipment. EITHERcompliance fees for clothingitems also differ from non-apparel items.
AMZ uses two main size tiers to determine compliance charges. They are standard size and oversize. And these size layers have different sub-layers.
Here's a breakdown of FBA's current fee structure for fulfillment fees, based on size tiers.
|Layer size (maximum dimension)||Weight||Service fee per unit|
(15" x 12" x 0,75")
|6 ounces or less||$ 2,70|
|6+ to 12 ounces||$ 2,84|
|12+ to 16 ounces2||$ 3,32|
(18" x 14" x 8")
|6 ounces or less||$ 3,47|
|6+ to 12 ounces||$ 3,64|
|12+ to 16 ounces2||$ 4,25|
|1+ to 2 pounds||$ 4,95|
|2+ to 3 pounds||$ 5,68|
|3+ pounds to 20 pounds||$5.68 + $0.30/lb on the first 3 lbs.|
|Layer size (maximum dimension)||Weight||Service fee per unit|
|Small Large Size (60" x 30")||70 pounds or less||$8.66 + $0.38/lb over the first few pounds|
|Size Large Medium (108" (longest side)||150 pounds or less||$11.37 + $0.39/lb over the first few pounds|
|Large Oversize108” (longer side)||150 pounds or less||$76.57 + $0.79/lb over the first 90 lbs|
|Special large size (18" x 14" x 8")||over 150 pounds||$138.11 + $0.79/lb for the first 90 lbs.|
Clothing items cost an additional $0.87, while items with lithium batteries cost an additional $0.11. You should know that service charges are generally reviewed annually. The current structure came into effect on June 1, 2021 (Source:Amazon Seller Center).
FBA Fees: A Breakdown of Inventory Storage Fees
Inventory Storage Fees – AMZ charges this based on the amount of space your inventory takes up. Your stock volume is calculated per cubic foot. Usually it is based on the size of the product after packaging and shipping.
There are two types of storage fees: monthly inventory storage and long-term inventory storage fees.
- Monthly Inventory Storage Fees – This type of inventory storage fee is billed monthly. AMZ collects this fee between the 7th and 15th of the month following the month in which the fees are incurred.
- Long-Term Inventory Storage Fees – This fee is charged for items that remain in AMZ fulfillment centers for more than 365 days. AMZ deducts monthly charges for long-term inventory storage. Normally between the 18th and 22nd of each month.
Here is a breakdown of the current fee structure for inventory storage:
Monthly inventory storage fees
Monthly inventory storage charges vary by season. Therefore, there are different monthly inventory storage fees. It is divided in January to September, then from October to December. Like compliance, AMZ uses standard and oversized tiers to determine the fee. The fee structure for dangerous goods also differs from that for non-dangerous goods.
Here is a breakdown of the current fee structure for inventory storage
|January - September||$0.75 per cubic foot||$0.48 per cubic foot|
|October December||$2.40 per cubic foot||$1.20 per cubic foot|
|January - September||$0.99 per cubic foot||$0.78 per cubic foot|
|October December||$3.63 per cubic foot||$2.43 per cubic foot|
Here, the charge for oversize products is less than for standard size products. This is because standard size products are smaller than full size products. In addition, their storage requires more complex and expensive shelves, drawers and boxes.
Long-term storage fees
Amazon deducts long-term storage fees of $6.90 per cubic foot or $0.15 per unit, whichever is greater.
In addition to the costs above, there are other fees to consider. These are not required, but a seller could end up incurring them. So it's better to know what they are.
- Disposal Order and FBA Disposal Order Fees: You incur these costs when you ask AMZ to remove unsold items from your inventory. FBA removal order and disposal fees are charged per unit of the discarded item. It is based on the size level of the item and the weight of the shipment.
- FBA Returns Processing Fee: When a customer returns an item in certain categories, this service fee is charged. This fee is charged per unit and is determined by the size of the item and the weight level of the shipment.
- FBA Unplanned Service Charge: If you ship your inventory to a fulfillment center without proper packaging, AMZ will do it for you. However, charges for unplanned services will apply.
To avoid this, pay attention to AMZ's preparation and packaging requirements.
Selling Fees for FBA Sellers
There are other costs that FBA sellers incur. However, they pay these fees to sell on Amazon, not because they use the fulfillment service. It's important to keep this in mind regardless of the fulfillment model you choose, as this will guide you in pricing your products. Some of these selling fees are mandatory, while others depend on the category of product you are selling.
Related:Seller's Guide to Selling in Restricted Categories
Mandatory Selling Fees
These are the selling fees that FBA (and FBM) sellers must pay:
- Selling Plan Rates: Every seller pays these fees to sell on Amazon. Selling plans incur a monthly subscription fee or a per item fee. The value depends on the Sales Plan you choose when registering.
If you choose the single selling plan, you will be charged a fee of $0.99 for each item sold. If you use the Professional Selling Plan, you will be charged a flat fee of $39.99 each month. The professional selling plan fee does not depend on the number of items you sell. Selling plan charges are generally deducted from your account balance. However, your credit card will be charged if there are not enough funds in your account.
Related:Deciding Between a Professional or Individual Amazon Seller Account
- referral rate: For every item sold on the Marketplace, Amazon receives a commission. This is known as the referral fee. Referral fees are a fixed percentage of the total sales price. Most of them range between 8% and 15% depending on the product category. For some categories, the referral fee is based on dollar sales. For example, electronics charge 15% of the total sales price up to $100, then 8% on any fee over $100.
As with fulfillment costs, Amazon adjusts its referral fees on an annual basis. The current referral fee structure became effective June 1, 2021. You can view the 2021 referral fee changeshere.
Other sales fees
- Variable closing rates:AMZ charges variable closing fees for products in the media category. This includes products such as books, music, software, video games, etc. Variable closing fees are generally around $1.80 per item.
- Reimbursement of administration expenses: When a customer requests a refund for an item they already paid for, AMZ will process the refund. They will also refund the referral fee paid for the article. However, AMZ will deduct a refund administration fee, which is typically $5 or 20% of the referral fee, whichever is less.
- High Volume Listing Fee:If you have more than 100,000 products listed, you will need to pay a high volume listing fee of $0.005 per item. High volume listing fees and FBA storage are paid at the same time.
- Book rental service fee: If you rent textbooks from Amazon, you will need to pay a rental fee of $5 for each book you rent. This fee is usually collected at the time of sale.
How to Calculate Amazon FBA Fees
When starting a FBA business, it's not enough to just know the fee structure. You should also calculate how much you will pay as a seller fee for each product you decide to sell. It is important to become familiar with the costs of Fulfillment by Amazon. This will help you choose a product with high profit potential. and guide you in pricing your products to generate good profit margins.
Amazon offers it for freecalculatorthat you can use to estimate how much you'll pay as a FBA seller. EITHERCalculatorprovides an estimate of your fulfillment costs and other seller fees. All you have to do is enter the price and cost of the product. EITHERcalculatorit also calculates your returns, net profit and net margin.
The calculator allows you to compare fulfillment costs through FBA or FBM. This raises the question,"Is FBA cheaper than FBM?"
Taxones FBM x FBA
The goal of all business owners, including sellers, is to make a lot of profit and cut costs. That is why sellers want to know if it is cheaper to go FBA or FBM.
Unlike FBA sellers, FBM sellers do not need to pay any additional cost as they fulfill the orders themselves. But FBM sellers have to bear all the major costs. They will also have to deal with customer service and returns.
Although FBM sellers do not have to pay any fees, the costs incurred are generally higher than FBA fees. This is because AMZ is a conglomerate. For this reason, they have an advanced service infrastructure and distribution network. As a result, AMZ is able to negotiate lower freight rates with logistics service providers.
There are other factors to consider before choosing a fulfillment option. The size of the product is an important factor. FBA is best suited for small, lightweight items that sell quickly. What if you sell heavy, expensive items that don't sell fast? It is better to use the FBM model so as not to accumulate heavy loads.
Well established companies can deal with reliable carriers. Therefore, FBM may be more beneficial in this case.
You can also use theCalculatorto determine which care option costs less.
How to reduce FBA fees
The charges may seem like a small price to pay for the many benefits you'll experience using Fulfillment by Amazon. But FBA charges can cut into your profit if you're not careful. Here are some steps you can take to reduce your expenses:
- Selling Small and Light Items: Processing and storage costs depend on the size and weight of the item. Therefore, the lighter and smaller the product, the lower the fee costs incurred. Selling small and inexpensive products qualifies you for the FBA Small and Light program. This program offers reduced costs of care.
- Monitor your stock performance regularly – In your Seller Central account, you can assess how your stock is performing. Use the inventory performance index (IPI) score. Check the items that do not move and remove them from the warehouse. Otherwise, you will incur higher charges, calledlong-term storage fees.
- Check your invoices for discrepancies and file the corresponding claims: Audit your invoices and look for discrepancies. If you find any, you cansubmit a claim for reimbursement. Remember that there is a time limit on this and the time limits depend on the type of claim you are filing. If your claim proves valid, AMZ will refund the retail value of the affected stock. Therefore, you recover the profit that you would have obtained with that action.
- Remove backorders from fulfillment centers: Amazon inspects returned orders and decides if they can be resold. Products that are no longer in good condition are kept in the distribution center. As a result, they will continue to incur storage charges. check theInventory Integrity Reportin the Seller Center. That way, you can see if you have any unsellable inventory. You can then choose to have them destroyed or returned to you.
Fulfillment by Amazon is truly an amazing service that third-party sellers can benefit from. But the service is not free. There are several costs involved. You need to proactively learn about them and manage them well. Otherwise, you will end up paying certain fees that you could have easily avoided.
Remember, there are tools available to you. ZonBase can help ensure you get the most out of your FBA business. The Zonbase software suite contains all the tools that will help you achieve your sales goals. Forward,Start your free trial today.