Most new sellers on Amazon are eager to understand all the fees and costs associated with selling on Amazon.
AMAZON REFERRAL FEE
Selling on Amazon as a merchant involves a variable “Referral Fee” which is a percentage-based fee that Amazon sets and varies by category. You can find the referral fee applicable to your product category in Amazon’s fee schedule. Most consumer products have a 15% referral fee.
Once a sale is made on Amazon, the order must be fulfilled and shipped to the customer. There are 2 options for doing this:
Fulfill the order yourself, or via a 3rd Party Fulfillment Provider. In this instance, there are no more direct selling fees to pay
- Have Amazon fulfill the order for you using their FBA program, discussed below
AMAZON FBA FEES
Using Amazon’s Fulfillment Program you can send your inventory to Amazon and have them pick, pack, and ship the order to the customer. Every time an item sells, you’ll pay the variable Referral Fee based on the item’s price, as well as a fulfillment fee.
The FBA fees are broken down are as follows:
$1.00 Order Handling Fee
$1.05 Pick & Pack Fee
Weight based shipping fee - varies based on dimensional weight of the item
- Monthly Storage fees - varies based on the size of the product. As little as $0.03/month per product.
Pricing structure is for standard sized items. If your products are oversized or heavy, a different fee model exists.
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A rule of thumb when reviewing the FBA fee model - LOWER PRICED ITEMS HAVE proportionately HIGHER FEES. The nature of Amazon’s fixed fee structure means that lower-priced items have proportionately higher fees.
Any product priced under $10 will generally be paying more than 40% in direct selling fees. The higher the price of your item, the less it will pay proportionately in fees (i.e. as a % of the item’s price).
PRICE INFLUENCES % OF FEES PAID
MONTHLY PROFESSIONAL SELLING PROGRAM FEE: $39.95
Amazon pays out your sales every 2 weeks, and deducts fees from your gross sales. The exception is for Amazon Sponsored Products (Amazon’s Advertising program) which is charged to the credit card on file.
If using Amazon FBA for order fulfillment, you’ll need to transport your inventory to Amazon’s warehouses. Amazon lets you take advantage of their super-low domestic rates with UPS for package shipments, otherwise you can use an LTL or FTL service.
Many new sellers want to know which warehouse they will be sending their inventory to. Amazon’s system actually determines the destination fulfillment center at the time of creating the shipment.
Inbound shipping charges: vary
Refunds and exchanges
Part of Amazon’s appeal to customers is their flexible return policy. Customer refunds are subtracted from your account balance. Some categories have a higher return rate than others, like clothing and footwear. You should factor in a return allowance as part of your overhead costs.
Amazon’s advertising platform is a very efficient and effective way to drive qualified traffic and sales, provided you have a properly implemented Amazon PPC strategy.
Amazon Sponsored Products (PPC)
In this program, Amazon is buying your inventory from you at wholesale. A typical wholesale rate is 50% of the retail selling price, but this varies based on Amazon’s assessment of your product.
Amazon will offer a Purchase Order (PO) for a given number of units, at the price they want to pay for your inventory. Once you’ve filled a Purchase Order with Amazon, that’s basically all the fees you’ll pay - Amazon handles freight and shipping expenses. There may be other incidental fees like a returns allowance and co-op fees, as well as any Advertising or Marketing services you wish to invest in.
Amazon Launchpad is a program for hardware startups and new product innovations. Launchpad is run through the Vendor program.
Amazon Vendor Central / Express Fees
AMAZON FEE EXAMPLES
FIXED & VARIABLE
merchant fulfilled example:
Selling price: $10.00
+ Amazon negotiated price: $5
Selling price: $10.00
-Referral fee (15%): $1.5
-Order handling fee: $1.00
-Pick & Pack fee: $1.05
-Weight based shipping fee: $0.50
Vendor central example:
Selling price: $10.00
+ Shipping charges (paid by buyers): $2.50
- Referral fee (15%): $1.50
Always check for the most current fee schedule on the Amazon website.