Last updated on June 20th, 2023
Written by Himanshi Raj
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.
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.
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:
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.
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.
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.
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.
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:
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.
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:
Amazon offers two types of plans: Individual Seller and Professional Seller.
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.
Your inventory storage fee depends on how long your items stay at the Amazon Fulfillment Centers:
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.
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.
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.
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.
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:
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.
Don't let these Amazon fees bring you down. Here are ways to reduce your expenses:
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!
Buying in bulk for resale is a standard business practice in the modern, globalized economy. From online marketplaces like eBay and Amazon to local flea markets and boutique shops, entrepreneurs are capitalizing on the price differences between wholesale and retail. But is this practice always legal? This article sifts through the legalities of bulk buying […]
Are your Amazon product listings struggling to catch the eye of potential buyers? It’s been a common challenge for new and even experienced Amazon sellers. This is where mastering the art of writing perfect Amazon titles becomes a game-changer. In this guide, we’ll take you through the essential tips for creating Amazon product titles that […]
For FBA sellers, the Buy Box is the Holy Grail. It is their golden ticket to securing their position and dominating the cutthroat marketplace. But what if you could eliminate the competition and own a Buy Box yourself? This isn’t just a dream; it’s achievable through Amazon FBA Private Label. If you’re tired of sharing […]