Amazon FBA Fees: The Price Of Selling In The Amazon FBA Program

Last updated on June 20th, 2023

Written by faith

Amazon FBA (Fulfillment by Amazon) is used by 66% of the platform's 2.5 million active Amazon sellers. As an Amazon FBA seller, you can entirely focus on marketing your products. Simultaneously, Amazon will handle the other half of your business—the fulfillment of orders. 

However, one reason new sellers hesitate to join is the Amazon FBA fees for the sellers. This article will discuss how Amazon FBA works, the breakdown of fulfillment costs, and some tips to help you lower them.

How Does Amazon FBA Work?

Amazon FBA's concept is simple. You sell products, and Amazon ships them. Besides order fulfillment, they are responsible for answering customer queries and managing returns. Here's how Amazon FBA works:

1. Your supplier ships the products to an Amazon Fulfillment Center.

2. Amazon will store your products.

3. The customer makes an order.

4. Amazon will pick, pack, and ship the order.

5. Amazon will handle any queries from the customer.

6. Amazon will manage returns assuming the customer isn't satisfied with the order.

In the first step, your supplier will ship the products to an Amazon Fulfillment Center via a freight forwarding firm or pallet shipping. Amazon will then store your products until it gets ordered.

Is Amazon FBA Worth It?

Amazon's Fulfillment Center operates in a highly sophisticated environment. Every fulfillment process is handled there, from start to finish, making it more than just a storage facility. Other than the 250,000 associates working in Fulfillment Centers worldwide, more than 100,000 robotic drive units, palletizers, and robo-stows operate around the area. 

Humans and robots work hand in hand to make the complicated fulfillment method seamless. Aside from the process mentioned above, Amazon FBA sellers can enjoy the following:

FBA is Your Ticket to Prime

Why is it a big deal to have the shiny blue badge? 

You can sell to ready-to-buy customers who love free two-day shipping. FBA products can qualify for Cyber Days and Prime Days as well. In case you're not aware, you must undergo a rigorous process to be Prime-eligible, including joining a waiting list and completing a trial.

Seamless Logistics and Delivery

As a Prime seller, you will surely appreciate Amazon's Fulfillment Centers' capability to manage a high volume of orders. Amazon offers prime shipping, where customers can enjoy fast and free same-day shipping benefits.

Higher Product Ranking

Amazon's A10 algorithm prioritizes FBA product listings over non-FBA products. Apart from this, your product listings have a higher possibility of winning the Buy Box.

Build a Scalable Business

Amazon offers specialized services to help scale your business. You can join different Amazon products, like FBA Small and Light, FBA Subscribe & Save, and Multi-Channel Fulfillment. 

What to Sell On Amazon FBA

Your enrollment in FBA will be all for naught if your product is not promising. How can you build a brand (or an empire!) with a product no one wants? Whether you like it or not, conducting product research is a must. You should accomplish this before creating a professional Amazon seller account—even while just considering selling online. 

One of the easiest ways to choose what to sell on Amazon FBA is through Amazon itself. Look for the best-selling products by going to the Amazon Top Seller section near the bottom of the Homepage. Once you click the link, it will show a selection of viable product ideas. 

Here are qualities of a feasible product idea that you may consider to create a shortlist of profitable products:

• High demand - This product is often in Amazon's Best Selling or Top Seller section. Find a product that sells at least 300 units per month or roughly ten units per day.
• Not competitive - Low competition means you have a higher chance of selling. Check out products with an average of 50–100 reviews.
• Has room for improvement - Select products with only a 3–3.5 star rating but high demand. 
• Not patented or trademarked - Avoid lawsuits and choose a product without an existing patent or trademark.
• Easy to sell - No product is "easy" to sell. With this condition, we're talking about a product that won't give you problems in sourcing, importing, and manufacturing.

Besides the criteria above, always set the selling price range between $15–$50 while searching for the perfect product, as this is the "sweet" spot for many Amazon customers. 

After you've figured out what to sell on Amazon FBA, your next task is educating yourself about its fees.

Understanding Amazon FBA Fulfillment Fees 

Don't be scared. The FBA fulfillment fees you will see on Amazon's website are enough for you to run for the hills and never take a look at FBA ever again. As a new Amazon FBA seller, it might be overwhelming initially, but you will soon grow accustomed to the fees as your business progresses. 

Here's a summary of Amazon fulfillment fees you'll eventually get acquainted with:

Seller Central Account Fees

Amazon offers two types of plans: Individual Seller and Professional Seller. 

• Individual Seller Plan - No monthly fee, but you must pay $0.99 + additional selling fees per item sold. You won't have access to Amazon's advertising tools.
• Professional Seller Plan - Requires a monthly subscription fee of $39.99 but comes with Amazon's marketing tools and more.

We suggest starting with an Individual Seller plan if you haven't chosen a feasible product idea yet. You can transition to a Professional Seller plan once everything has been laid out.

Inventory Placement Service Fees

Your inventory storage fee depends on how long your items stay at the Amazon Fulfillment Centers:

• Monthly Inventory Storage Fees - Amazon will house your inventory in their warehouse for a certain amount of storage fee. Monthly storage fees may differ depending on your product size. Standard-size products could range between $0.75 - $2.40 per cubic foot, while oversized products could range between $0.48 - $8.26 per cubic foot.
• Long-Term Storage Fees - For inventories stored between 365 to 730 days, your monthly inventory fee costs $0.15 per unit or $6.90 per cubic foot, whichever is greater. For 730 days (24 months) beyond, the long-term storage fee is $6.90 per cubic foot or $0.30 fee per unit, whichever is greater.
• Removal Order Fees - These additional fees are incurred when FBA sellers request that their inventory should be returned or disposed of by Amazon. The fee per unit for removal is $0.50, and the $0.15 fee for disposal.

Aged Inventory Surcharge

The aged inventory surcharge is an additional fee that Amazon may apply to certain items stored in their warehouse for an extended period. The purpose of this surcharge is to encourage sellers to manage their inventory more effectively and prevent excessive amounts of stagnant inventory from occupying valuable warehouse space.

The storage utilization surcharge is typically applied to items that have been in storage for a specific duration, usually between 181 and 365 days. The specific criteria for the surcharge, including the fee amount and eligibility of products, can vary depending on Amazon's policies and guidelines.

Fulfillment Fees

These fees cover the Amazon FBA costs of storing, picking, packing, and shipping the seller's products. They vary based on the product's size, weight, and category.

Return Processing Fee

One downside of being Prime-eligible is that the customer can return an order whenever they want without your consent. The return processing fee is equivalent to the fulfillment fee.

Referral Fees

Amazon referral fees are fees charged by Amazon to sellers for a portion of the total item price sold on their platform. These fees are a percentage of the item's total sales price, including the item price and shipping cost. 

Different categories may have different fee structures, and the percentages can range from a few percent to as high as 45% in some instances. Amazon deducts the greater of the applicable referral fee percentage or applicable per-item minimum fee.

Labeling Fee

If your supplier doesn't label your items with a barcode, Amazon will charge you $0.30 per unit. If a seller chooses this service, Amazon will apply the necessary labels to the products before they are sent to the Amazon centers. This ensures that the products can be identified and tracked within Amazon's system during fulfillment.

Now you know the different Amazon FBA fees. It is a valuable tool that calculates how much you can earn, depending on your chosen product idea. The FBA Calculator also shows the Amazon FBA fee you will pay per-unit basis. 

What are the types of Amazon FBA fees it covers? Let us break it down:

• Selling on Amazon Fees - Consist of a variable closing fee and referral fee. The latter is only applicable to media products.
• Total Amazon Fulfillment Cost - This part only concerns the Fulfillment by Amazon fees, calculated based on the item's weight and dimensions.
• Storage Cost - Pertains to the monthly storage fee of store inventory.

The Amazon fee calculator only calculates upfront costs. There are other fees that you should take note of, as mentioned above. The charges are applied to your Amazon account balance around mid-month.

8 Tips to Lower Amazon FBA Fees

Don't let these Amazon fees bring you down. Here are ways to reduce your expenses:

1. Limit the weight and dimensions of an item. Remember that FBA storage fees are based on these two. 
2. Try bundling items if applicable. You need to pay fulfillment fees if you sell it separately. Bundled items also make good promotions on Amazon.
3. Schedule an inventory cleanup. Aged inventories are an eyesore to Amazon, and they will charge you for not selling your products right away. 
4. Promote a clearance sale for your aged inventories. 
5. Put your unwanted items up for sale in the Amazon Outlet. This little-known section sells clearance and overstocked items. 
6. If scaling your business to European countries is not enough, Amazon has an FBA Export program where customers worldwide can buy it. Amazon doesn't charge you for the excess shipping costs.
7. Prevent Amazon from shipping your product to other fulfillment centers. Amazon "tests the waters" of a particular market, usually another country. The shipping fee is then charged to you. To stop this from happening, create and submit a concrete shipping plan specifying your preferred shipping location to Amazon.
8. Create Amazon PPC ad campaigns. In Amazon, you don't only have the privilege to sell on its platform, but you can advertise your products with Amazon's tools, like Sponsored Products, Sponsored Brands, and Display Ads.

Conclusion

The success of your Amazon FBA business doesn't only depend on how much money you invest in it. It is integral for you to know how Amazon FBA works, so your budding business can quickly adapt to the ever-changing environment of Amazon FBA. 

Be extra cautious in searching for a viable product with high demand and low competition. Always consider ways to save yourself from drowning in Amazon fees; try the tips above to reduce your costs.
Talk to us here at Seller Interactive! We have a team of expert Amazon consultants willing to help and guide you through the ins and outs of Amazon FBA. For inquiries, email [email protected]. We'd love to hear from you!