Amazon Seller Fees and their Impact on Your Profits.
What Are All The Amazon Seller Fees?
This is the ultimate guide to Amazon FBA fees for third-party sellers.
Amazon FBA has been a popular way for online retailers to get their products sold on the world’s largest marketplace. However, there are a lot of costs that sellers have to take into account. In this article, we will cover all the different Amazon FBA fees and costs that sellers need to be aware of so they can make educated decisions about their business.
Know Your Numbers When Selling Online
Selling on Amazon is a wonderful idea, and it can benefit you in the long run if you take steps after performing the due calculations. You can risk your hard-earned money if you dive blindly into the Amazon business without doing proper research for competition, risk assessment, profit margin anticipation, and without investigating a few other significant pre-launch variables.
This article specifically covers all the aspects regarding Amazon seller fees and their impact on your profits. You’ll have a clear picture of your profits and Amazon selling expenses after reading this blog.
Several factors affect the cost of selling on Amazon, including your selling plan, product category, and fulfillment strategy. Let’s discuss the different types of fees that a seller must pay on Amazon.
Amazon Fees by Selling Plans
Your journey on Amazon starts with the selling plan. Amazon offers 2 plans for sellers:
- Individual
- Professional
Click here to see the details.
1- Individual
It’s the basic plan and you can start with it if you want a “test drive” on Amazon. It is a limited plan which allows you to sell 40 units per month. Moreover, you’ll not be able to run advertising campaigns with this plan.
Amazon will charge $0.99 per item sold on its platform plus the additional selling fees that are explained below in this article.
Individual Plan Suits you if:
- You expect monthly sales of less than 40 units
- You don’t want to run advertising campaigns
- You want to learn how to sell on Amazon
- You are tight on budget
2- Professional
A professional plan is amazing and gives you a lot of privileges over the individual plan. You can sell unlimited units per month and expand your catalog as much as you can. It costs just $39 per month and has flexible features.
You can advertise your product with the professional plan, you can sell in multiple categories, it allows you for bulk operations, and much more.
Professional Suits you if:
- Your expected sales are above 40 units per month
- You want to sell by utilizing all the facilities
- You aim to sell multiple products
- You want to advertise your product
Types Of Fees And Their Names
Amazon Referral Fee
Referral fee varies category-wise. Generally, it moves between a minimum of 8% to a maximum of 15% for most of the categories. It applies to the sales price, and you would have to pay the set percentage for each sale. Here you can see the complete breakdown of the referral fee category-wise.
Amazon Fulfillment Fee (FBA Fee)
There will be shipping charges whether you are doing FBM or FBA. If you want to fulfill it by yourself then it can save you some dollars. However, nowadays Amazon is making it harder day by day to do FBM and encouraging sellers to join the FBA program. Please follow the link to see all details about fulfillment fees.
Amazon Storage and Long Term Storage Fee
There will be an additional storage fee for your product if you join the FBA program. Storage fee depends on the weight and dimensions of the product. Moreover, Amazon charges an extra amount as a storage fee during the last quarter.
Other Expenses
A few optional programs might increase your selling cost, these are:
- Advertising on Amazon
- Amazon-partnered carrier program
- Premium account services
- Inventory placement service to spread your inventory within all the FBA centers
Click here to see the details.
Impact of Amazon Seller Fees on Your Profits
Calculating the Amazon seller fee isn’t rocket science, you can easily find the different types of fees that you would have to pay while selling on Amazon.
The most ignored fact is that these fees will be deducted from your profits and most of the sellers don’t research properly which eventually leads them to a certain failure.
Amazon selling charges have both positive and negative impacts on your profits. Let’s precisely discuss its pros and cons.
Pros
Budget Friendly
Doing business on Amazon is far more economical than running a brick-and-mortar store. Yes, there are exceptions but most of the time Amazon proves budget friendly and gives the easiest way to do business.
You have to fulfill a few requirements and you are all set to use this ready-made e-commerce platform packed with potential buyers.
You can start wholesale with just a $2000 minimum if you are tight on budget and want to do less risky business on Amazon. You can also list any product in case you have a physical shop and want to sell on Amazon.
Makes it Easy to Launch your Brand
Amazon offers a lucrative Private Label selling option where you can launch your brand with your suggested name. Your brand will be protected under the brand registry. Launching a brand is much easier on Amazon as compared to launching through a website.
Amazon facilitates you during the different phases of your launch. Later on, you can expand your business off-Amazon.
Opportunity to Grow & Scale
You can run your online shop at Amazon from any corner of the world. All you need is a seller central account and you can operate globally. It gives you a great opportunity to grow and scale globally.
You can perform all the operations from your home and such a wonderful facility is available in the budget. Most of your business activities will run on autopilot.
Cons
Oversaturated & Highly Competitive Market
As you read above, Amazon provides a robust online business platform with economical operating expenses. Such privileges allure people around the globe and everyone is coming to test her/his luck.
This situation results in an oversaturated market where cut-throat competition is going among the sellers. An overpopulated market directly affects your profit margins.
Increase the Cost of Selling
Your product comes live on Amazon after passing many phases where you paid a lot of expenses like inventory cost, shipment charges, customs, duty, taxes, etc. The Amazon seller fees become additional expenses and curtail your profit by increasing your cost of selling.
However, you wouldn’t have to pay all the Amazon charges in advance. Usually, most of these charges are paid after getting sales and you can manage them with your Amazon balance.
Furthermore, you should carefully hunt the product by keeping in mind all the expenses and costs that you would have to pay in the future.
Eats your profit
Amazon provides the world’s largest e-commerce platform that brings potential buyers. Knowing its worth, it demands a specific portion of your sales.
Amazon PPC is the most ignored expense of selling which is the lifeline for any product on Amazon. You can’t expect to survive on Amazon without running the PPC.
PPC campaigns can eat all your profits if you don’t run them properly. Nowadays, it’s becoming harder day by day to bid economically as there’s rising competition which eventually increases the bids for PPC ads.
Recommendations
You might be getting demotivated after reading about the impact of Amazon fees on your profit. Don’t lose hope so early, I’m going to recommend you a few precautions that can help you to successfully launch on Amazon.
Don’t work with Low Ticket Products
Low ticket items aren’t going to earn you any money because of the tough competition where all your profit will be spent on paying the different fees.
Ideally, you should work with a 40% margin product which is a good profit margin for Amazon sellers to play safe with minimal losses. However, you can go for at least 30% but don’t consider any product below it otherwise your product will struggle.
A product with a price of at least $15 and 30% to 40% profit margins is considerable to sell on Amazon.
Provide quality product
Don’t compromise the product quality. Usually, sellers try to save some money by reducing product quality. But they forget that there are already many live products with a good chunk of reviews and stable sales, whereas a new product with zero reviews and no sales history will go to Amazon’s recycle bin if you ignore the market standards.
The best practice before launch is to order the top-selling products and test them to the last extent to have an idea about their quality. Read the competitor’s reviews thoroughly and note down all positive and negative feedback about their products to know common complaints. In this way, you will reduce the chances of your product failure.
Sell What’s Selling
Don’t try to become innovative, only sell what is selling in the market. An innovative product needs a lot of effort to get successful and you will have to spend much more money on building its audience.
Try to assess the market demand and act accordingly, for example, if there is a pack of 20 selling for a specific product, and your research tells you that there is a chance of success if a new pack size is introduced.
Here you can introduce a little innovation in the pack size and launch a higher or lower pack size according to the assessment that you’ve made after the market research.
Sound Sourcing
Your sourcing decides the fate of your product. You can lose all your money If you mistakenly choose an incompetent supplier. Don’t rely on a single supplier, take multiple quotes from multiple manufacturers and suppliers, and try to get the lowest cost with the highest quality.
Shortlist the suppliers and ask them for the samples. Then again shortlist the supplier based on samples and demand more samples from the short-listed supplier. Use and abuse those samples and don’t hesitate to point out flaws in them. So that you can get the best quality.
Expand in Length & Breadth
Expand your product in length and breadth. For example, if you are selling a white bath towel pack of 2, then expand it in multiple variations of different pack sizes or different colors.
In this way, you will be giving a lot of choices to your customers, and they will check out at least buying any item that fits their particular budgets. Keep a small inventory for all variations and distribute your capital to those smaller units of inventory to maximize your profits.
Inventory Forecasting
Don’t order higher inventory at stat. Begin small and collect your sales data to forecast your inventory for future months. You should have at least 2 months of inventory in the FBA and keep the backup at your home if you live within the country where the FBA center is located or in the 3PL if you’re a foreigner.
This strategy will help you to save storage costs and to improve the IPI score. Later, after predicting your sales you can increase the inventory in FBA.
Let’s Conclude
Selling on Amazon is the dream of most people today. You can do it if you take the right steps in the right direction. Amazon provides the world’s largest online platform with a huge audience where you can expand your business exponentially and the most thrilling part of this business is that it is not bound to the borders of any country.
Though there are a lot of incurring expenses while selling on Amazon but still it is more economical than traditional businesses. It allows you to start your own PL. It gives you a low-budget business opportunity in the wholesale slot. There is a lot to explore but remember that you should have prior knowledge and understanding of the dos and don’ts of this business.
That’s all. Hope that this article has helped you to understand Amazon selling fees and their possible effects on your profits. If you have any queries, please ask me in the comments below.
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