Have you heard about Fulfillment by Amazon (better known as Amazon FBA) and how it works?
No, it’s not too good to be true.
Amazon FBA is a legitimate way to simplify your warehousing, shipping and customer service. You can work anywhere, anytime and still guarantee reliable, on-time delivery.
However, it is not free.
You have a lot of Amazon FBA fees to consider in addition to the normal shipping, returns, and sales fees.
However, don’t let the word “entitlement” deter you. Despite the added costs, Amazon FBA has a good chance both are still worth the investment financially and work-life balance perspectives.
Below, we’ll break down each Amazon FBA fee to help you understand where every penny of your money goes. We’ll also give you calculators to help you estimate your costs and expected ROI.
But first – is Amazon FBA worth all the hassle of calculating these fees?
Is Time Short? Here are the types of Amazon FBA fees
- Execution fee
- Storage fee
- Long term storage fee
- Disposal Order Fee
- Removal Order Fee
- Unscheduled Service Fee
- Refunds the processing fee
And here’s Amazon’s calculator tool.
Why sell through Amazon FBA?
Amazon FBA may have a few additional costs, but you get a lot of bang for your buck. There are several reasons you should consider this:
- Pay attention to Amazon’s reputation: Consumers trust Amazon. When they make a purchase, they know they will receive it (in days, not weeks).
- Provide Super-Fast Shipping: Today’s modern shoppers expect 2-day delivery. Anything else and you are behind the times. With Amazon FBA, you can keep up with even your biggest competitors’ expedited shipping.
- Combine your processes: Tired or wary of managing warehouses, customer service reps, and shipping teams? Deliver it all to Amazon FBA’s one-stop shop.
- Submit a Little Hell Job: It’s hard enough to run a business without doing all the packaging, labeling, shipping and customer service yourself. You’ve got bigger fish to fry – give the small stuff to someone else.
- Work into your schedule (or don’t): When you work with Amazon FBA, your products are processed, delivered and returned on time – whether you’re in the office or on the beach.
7 Amazon FBA Fees
Now that you’re excited about Amazon FBA, let’s look at the fees you can expect. Remember, we’ll go over a list of Amazon FBA fees – not all of your costs. You are still responsible for your overall Amazon fees (fees per item, referral fees, closing fees, etc.), manufacturing, website hosting fees, etc. will be
Here are 7 Amazon FBA fees:
1. Amazon FBA Fulfillment Fee
The FBA fulfillment fee is also known as the pickup fee. Amazon charges per unit to find, label, and ship products to customers. The fee is determined by the size, weight and category of the item. See Amazon’s rate cards to determine what fulfillment fee will be charged per unit.
First, look at the type of your product. Next, determine the measurement level. Need help figuring out what size package you have? See how Amazon sets product size tiers here. You will then use the shipping weight to determine your charge per unit.
2. Amazon FBA Storage Fees
Amazon charges a monthly inventory storage fee based on the size of your products. These fees vary depending on your product category and time of year.
For example, stocking inventory before the holiday season is often more expensive because Amazon has to hold extra inventory at that time (for all other businesses).
But you don’t need to guess this number. Each month of the year, Amazon provides rate cards to help determine your FBA storage fees.
3. Amazon FBA Long Term Storage Fee
Unfortunately, Amazon FBA is not a place to store your extra inventory – especially if it’s not selling quickly. Amazon charges a long-term storage fee for any product that remains in storage for more than 365 days.
FBA uses a first-in, first-out calculation to determine the age of your inventory. Some products have shorter long-term storage fees, so be sure to check Amazon’s inventory health manager to determine which items have storage limits.
4. Amazon FBA Disposal Order Fee
You may want to discard old product that is not selling and collecting storage fees. FBA will drop off your products for you, but there will be a fee to do so. Prices vary based on the size and shipping weight of your products.
5. Amazon FBA Delete Order Fee
Extraction and disposal are not the same thing. If you want Amazon to return your inventory to you, submit an FBA removal order – if you want them to go ahead and trash it, submit an FBA removal order.
Removal order fees also vary based on the size and weight of your items. Please note that disposal order and withdrawal order prices are the same. However, if you request a shipping order and then decide to dump it yourself, it will likely cost you a separate bill along with your landfill (unless you sell sticky notes).
6. Amazon FBA Unscheduled Service Fee
Amazon has strict guidelines for preparing and labeling your products before sending them to their fulfillment centers. If you get it wrong, you will have to pay per item to fix it. These mistakes can also delay the sale.
7. Amazon returns FBA Processing Fee
Amazon FBA conveniently handles all returns and exchanges for your products. However, with FBA, many categories of items offer free return shipping. While this may encourage more customers to try your products, it can also increase your return rate, and returns are not free for you.
For any products in the clothing and footwear category, you will be charged a per-product return fee. Return processing fees can be expensive. For example, if your customers return, you can pay $2-$43 per product.
Amazon FBA Fee Calculator
Don’t want to pull out your smartphone and crunch the numbers yourself? No sweat. You’re an entrepreneur – you don’t have to be a mathematician.
Try this plug-and-play Amazon FBA fee calculator to do the crunch for you. It’s Amazon’s calculator, so you can bet it’ll be spot on.
How to use Amazon’s FBA fee calculator
Using the calculator is quite simple. First, find the product you want to sell on Amazon. If you can’t find the product (or it’s not available yet), enter estimates for weight and package dimensions.
Next, enter your fulfillment details, such as product price, typical shipping costs, storage fees, and cost of goods sold. When you’re done, click the yellow “Calculate” button.
The Amazon FBA fee calculator will work out the estimated costs and ROI for you and Amazon to fulfill. You can see the net profit and margin for the two options head-to-head.
However, don’t let that last number be the deciding factor. Remember the precious time that the calculator does not show.
For example, selling through FBA may bring in slightly less dollars per transaction, but it can save countless hours of work. This is time you can spend managing your business and planning for the future.
More details: What to sell on Amazon: 8 tips for finding profitable products
Other Amazon FBA Costs to Consider
Of course, Amazon FBA fees aren’t the only costs you’ll encounter on your ecommerce journey.
Fortunately, Melisa Wong, who built two multi-million dollar brands on Amazon, has compiled a list of other costs you should be aware of:
- Business Formation: It’s not something you pay right away, but once you start earning more than $10,000 per month for three consecutive months, you must purchase liability insurance, which is only possible with a registered LLC.
- Trademarks: Amazon has its own brand registry tool that allows you to differentiate yourself from the competition. Registering trademarks can take a long time, so start the process early.
- Product inventory: Most of your budget should be allocated here. Make sure you save enough for your next inventory to ensure the delivery process goes smoothly.
- Delivery: Typically, shipping costs aren’t included in the price of your products, so it’s a cost you need to consider.
- 3Pl fees: 3Pls are middlemen you can use to check and pack your products because they are cheaper than Amazon’s in-house version.
- Branding: Brand costs include everything related to packaging, logos and branding your product.
- List of images: High-quality product photography is critical to a professional look and feel, and is therefore an expense you should consider.
- Amazon PPC: This is a pay-per-click promotion built into Amazon where you will be charged for each click on one of your product ads.
- Product research program: This refers to paid tools that help you identify products to sell under your brand.
- Gifts and discounts: Promotional tools like giveaways are highly effective, but they’re not free. It is important to consider the value of giving away products for free.
Ready to master Amazon FBA?
The world of Amazon FBA is vast, exciting, and full of potential. However, it is far from simple.
Instead of learning through trial and error, accelerate your journey from beginner to FBA pro with our training: How to Sell on Amazon FBA.
Melisa Wong will be your instructor, and Jeff Bezons practically paid for her house. He built a $2 million brand on Amazon using the “Core Product Method,” and now he’s breaking down the formula for success for you.
