All You Need To Know About Amazon FBA Fees
In the world of e-commerce, the name Amazon has become and still is a force to be reckoned with. As a multinational technology-based company with over $280 billion in revenue income in 2019, Amazon is often referred to as "one of the most influential economic and cultural forces the world has ever known", and rightfully so, it is.
The sole aim of an enterprise is to make a profit, and that exactly is what Amazon offers to greenhorns, young aspiring entrepreneurs who seek to sell on the world's own largest e-commerce market place, Amazon. The honcho of the e-commerce world, Amazon, boasts of over 2.5 million active sellers from different parts of the globe with over 350 million products on the marketplace and even a much larger number of over 60 million users and that is a lot, right?
How then does Amazon bridge the gap, a very wide one at that, between buyers and sellers from all parts of the world. Ensure that all products purchased by buyers get to their respective destinations in no time and good condition and also make profits? The innovation of the Fulfillment By Amazon(FBA) arrangement is the key.
This article is specially designed to help you understand how the Amazon FBA arrangement works paying special attention to Fulfillment By Amazon Fees. The advantages and disadvantages of FBA Amazon Fees and lots more. Hang tight while I take you through this enlightening journey!
What is Amazon FBA?
Fulfillment By Amazon (FBA) is a paid service arrangement provided and put in place by Amazon that affords sellers the following services; storage, picking, packaging, and shipping services for sellers to buyers such that sellers do not have to worry about the logistics of getting purchased items down to the buyer. This arrangement takes the burden off of sellers and grants them quite the measure of flexibility while selling their products.
The Amazon-Seller arrangement allows sellers to ship their merchandise or products to an Amazon fulfillment center, there, the merchandise is safely kept in warehouses until they are processed and shipped to their various destinations. Eventually, when a buyer places an order on the Amazon site, Amazon employees at the Amazon fulfillment center also called Amazon fulfillment employees are charged with the duty to pick, prepare, package, and ship the product(s) or merchandise to its new owner.
How does this arrangement really work? As a fulfillment by Amazon seller, one does not have to pay for the shipping, handling, or packaging to ship your goods and merchandise, rather, to offset these costs, you will be charged a fulfilled by Amazon fee for sellers, which is mostly determined by the size and weight of your product. But first, let us consider a comprehensive breakdown of the various fees you are required to pay as an Amazon seller using the following distinctions;
- Fees All Sellers Must Pay
- Fees All Fulfillment By Amazon(FBA) Sellers must Pay
- Fees All Fulfillment By Merchant(FBM) Sellers must Pay
- Fees for Amazon's Miscellaneous Services
Fees All Sellers Must Pay
Irrespective of what kind of seller you choose to be on Amazon, whether a Fulfillment By Amazon or fulfillment by merchant seller, you are required to compulsorily pay the following fees to continue selling on Amazon. If you need further clarification with Amazon fees, there is a platform you can turn to. IO Scout’s 24/7 expert chat feature is there to assist in the daily running of your Amazon business, and provide real-time, instant solutions to your queries, including Amazon fees related questions.
Subscription fees are also called individual per-item fees and are charged each time you make a sales transaction or at the end of the month depending on the kind of seller account you have on Amazon be it the individual account or the professional account.
For an individual account, sellers pay a non-negotiable sum of $0.99 for each sales transaction completed and can only be deducted after a sale has been made on Amazon. While you may not have to pay this fee upfront, it will be deducted from the available balance on your Amazon account balance.
For a professional account, the subscription fee for each product sold is deducted every month instead of per sales transaction made like an individual account. The seller pays a non-negotiable sum of $39.99 which is deducted from the seller's Amazon account. If a seller has no money in his Amazon account or the funds do not complete the amount, the amount will then be deducted from the seller's credit card.
For every sales transaction per item sold on Amazon, a flat 15% of the sales payment as commission is paid to Amazon for using the Amazon platform. These fees are often deducted from a seller's Amazon account only after a sales transaction has been made and may not be paid up front. However, depending on the product sold, the percentage may be lower than 15 but never higher.
Refund Administration Fees
Sometime, a sales transaction may go bad and the only compromise to end the dispute is for the buyer to request a refund on a product for which the seller had already been paid. In cases like this, Amazon charges either $5 or 20% of the charge to be refunded depending on which is less.
Once a buyer requests for a refund payment, Amazon immediately deducts the funds from the seller's Amazon account or the funds are charged through the seller's credit card if he is unable to pay from his Amazon account.
Fees All Fulfillment By Amazon(FBA) Sellers Must Pay:
For an FBA seller, the following are fees that must be paid on Amazon;
While a seller does not need to pay for packing, shipping, and handling of his merchandise, as an FBA seller, these will have well cared for by Amazon fulfillment employees. However, to offset these costs, the seller is required to pay an FBA fee which is charged based on the size and weight of the seller's product.
FBA storage fees:
Since Amazon offers safe storage for your merchandise at Amazon's fulfillment centers, it is only natural that Amazon charges storage fees to maintain each seller's inventory. There are two types of storage fees which are the monthly and the long term storage fees.
Monthly Storage Fee:
Should a seller have inventory in an Amazon fulfillment center by the end of the month, Amazon charges such seller a monthly storage fee which is either subtracted from the Amazon account balance of the seller or deducted from the seller's credit card should he not have enough funds to cover the amount.
Current monthly storage fees for storing products in Amazon's fulfillment center are divided into:
- Standard size: from January to September of this size, a fee of $0.69 per cubic foot is charged, while from October to December of standard size, a fee of $2.40 per cubic foot is charged.
- Oversize: from January to September of this size, a fee of $0.48 per cubic foot is charged, while from October to December of the oversize, a fee of $1.20 per cubic foot is charged. Be sure to use the Amazon FBA fees calculator online to confirm the charges as they may change from time to time.
Noteworthy is the fact that these prices may increase during Amazon's busy seasons to encourage sellers to remove their goods that seems to be slow selling.
A monthly routine conducted by Amazon on the 15th of each month is to take inventory. During this exercise, Amazon takes a record of products that have been housed in their Amazon fulfillment centers for 180 days or more. For such merchandise, Amazon charges the seller a Long Term storage fee of $6.90 for each cubic foot of storage used.
Fees All Fulfillment By Merchant(FBM) Sellers Must Pay:
A Fulfillment By Merchant seller is one who against all odds decides to store, pick, package and ship their product to the buyer while at the same time taking care of customer service but only makes use of Amazon to reach his prospective customers.
Understandably, an FBM seller does not pay as much as an FBA seller does while using Amazon as he is excused from payments for services not used which includes storage in a fulfillment center, packaging, and shipping. However, in the long run, an FBM seller would end up paying more for these expenses concerning what an FBA paid while using Amazon.
Carefully compare the costs of being an FBA and FBM and determine which fulfillment method is best for your business in terms of money, labor and time. Doing this will ensure maximum productivity and sales as you start your business as an Amazon seller.
Fees for Amazon's Miscellaneous Services:
The final category of fees, we will discuss in this article are the fees for Miscellaneous services which are paid to Amazon. This is irrespective of which fulfillment seller you are, whether an Amazon FBA or FBM seller. These fees include the following:
Book Rental Service fees:
This service fee is only paid by sellers either FBM or FBA who rent books on Amazon. Such sellers are required to pay a sum of $5 rental book service charge per every book rental they sell on Amazon. This payment is not to be paid in advance rather, it is deducted from the seller's available balance on Amazon or from the seller's credit card where the available balance on Amazon is not sufficient.
High Volume listing fees:
This type of fee is often paid at the same time as FBA storage fees. Sellers with only a few thousands of ASINs are required to pay a monthly non-negotiable fee of $0.005 for each ASIN. However, if a seller has more than a hundred thousand(100,000) products available and listed, such a seller will not have to worry about the high volume listing fees.
Having considered some examples of Amazon FBA fees, you may wonder what an Amazon FBA seller stands to gain from this method of fulfillment on Amazon.
The following are advantages of being an FBA seller and paying Amazon FBA fees:
Low Shipping Fees:
As a multinational e-commerce platform, Amazon boasts of a rock-solid relationship with most prominent shipping companies around the world. As such, FBA sellers making use of this service will have some cashback in savings as this service affords them to pay less in shipping as compared to having products shipped and delivered through a personal account.
Interestingly, FBA sellers may offer free shipping for some products over a certain amount especially if such products as sold through FBA are eligible for free super shipping.
Standard of Shipping:
Processing of all received FBA orders are done in the same manner Amazon processes its merchandise. This implies that when a buyer purchases a product, Amazon treats the order as its own and selects the product from its inventory and after which the product is packaged and shipped down to the buyer. Hence, Amazon shipping standards are employed in processing the order.
Full Access to the Prime Audience:
When a seller on Amazon pays the FBA fees, he becomes qualified for FBA listings, which are Prime eligible and are always displayed using the Prime Logo which most frequent buyers on Amazon are looking out for.
This is an added advantage as it affords the FBA seller to reach both new and existing buyers who require a one or two-day free shipping of which the offer is only applicable for some merchandise called Prime-eligible products. And since most buyers are much more interested in faster shipping, they would undoubtedly opt-in for a day or two-day delivery which also happens to be free.
Brand Name Association:
Everyone wants to be associated with the big guns, and in the global e-commerce market, the name Amazon is a force to be reckoned with. Sellers who pay FBA Amazon fees automatically have the Amazon name associated with their products and this helps foster the trust of buyers because with Amazon's name comes a high degree of quality guarantee and assurance.
Expansion of Business:
As soon as a seller settles Amazon FBA costs, he needs to worry not about all logistics part of his enterprise as this is fully covered by Amazon. With the logistics part of his service handled, an FBA seller is concentrated on plans to help expand his enterprises such as meticulously using his free time to conduct research, search for other product suppliers, and most importantly boost popularity and sales.
Buyers often feel comfortable and safe when purchasing from a vendor or seller who allows a return policy since they are certain such goods or products may be returned if found defective or unsatisfactory. Amazon cherishes absolute customer satisfaction, as such offers a quick return policy for goods or products that do not meet up with the buyers' expectations. In lieu of the aforementioned, any buyer will readily choose a brand insured with the Amazon return policy because of the guarantee that if need be the products will be returned.
The Buy Box:
In situations where a lot of sellers are selling the same products, getting a feature in the buy box is undoubtedly an excellent way to increase your chances of having buyers buy from you. The buy box can be located on the product's detail page. Here, a buyer starts buying by adding products to their carts. Buyers selling products similar to yours also compete for this space so, if you get a feature there, its because you are an FBA seller.
Having a bird's eye view of the aforementioned advantages, a person may reason that being an FBA seller does not have its demerits. Such thoughts are utterly unrealistic. Let us now discuss a few disadvantages associated with being an FBA seller.
Problems From Product Handling:
More than often as a result of the bulk inventory present at Amazon fulfillment centers, inventory may get lost, damaged, lost or even stolen during the fulfillment process. Sadly though, this human error is mostly or always from Amazon and Amazon fulfillment employees and not the seller.
In most cases, Amazon takes full responsibility for such loss and reimburse the seller the cash equivalent of the loss or a better-suited compromise. Unfortunately, in situations where such losses go unnoticed, and the goods are shipped and delivered to the buyer in it’s damaged or defective condition.
It becomes a great loss on the part of the seller because the buyer will definitely request for a refund, and given Amazon’s return policy, the damaged goods will be returned after Amazon deducts a percentage of the payment initially made for the product leading to a double loss on the part of the seller and such losses if consistent may bring an enterprise to a spiraling halt.
Making a total of FBA fees including storage and other fees can pile up to a hefty sum especially when over sized products are concerned. This may be a serious problem for a new seller who has issues with funds as he may face the risk of becoming bankrupt.
Unnecessary Returns: Some buyers may choose to intentionally return goods which were shipped to them in good condition and request a refund because of Amazon's quick return policy thereby giving FBA sellers a higher return rate since the buyers understand how easy it is to return goods or products on Amazon.
Specific Product Requirements:
For some products especially frail and fragile ones, Amazon has specific requirements for sellers to follow through before sending such products to an Amazon fulfillment center for processing. Such requirements may include; poly bagging, bubble wrapping, labeling to mention a few.
These requirements are demanded to ensure the products reach Amazon's fulfillment centers safely and without any damages. As such, the products in its best condition is picked, packed, labeled and shipped to it’s respective destination.
Difficulty in Tracking Inventory: After successfully shipping your products to an Amazon fulfillment center, it becomes increasingly hard to track your inventory, monitor products you need and products you need to reduce due to the abundance of different brands of products at Amazon fulfillment centers.
How much does Amazon FBA fees cost for starters? Ans: Depending on each standard item, Fulfillment By Amazon Pricing begins at $2.41 and $8.26 for an over sized product. Ideally, it is advisable to check how much an FBA seller will pay for his merchandise using Amazon's online calculator.
On what basis are Amazon FBA fees calculated? Ans: A lot of things are put into consideration when Amazon calculates FBA fees. They include; the weight of the product, size of the product, duration of storage and lastly the season.
What do I sell on Amazon?
For a newbie seller who wants to start selling on Amazon, it is advisable to first consider featherweight products that cost less than $100. Doing this will make it very easy to pay for Amazon FBA fees without a hitch.
Do I have to pay a monthly subscription on Amazon? Ans: The decision is entirely yours! However, understand the fact that monthly Amazon FBA payments cost $39.99 and are specifically designed for FBA sellers who intend to sell a great deal online. If you are a newbie on Amazon, you may choose to consider the option of a per-product sales plan which goes for %0.99 for each product sold.
Through the course of this article, it is very conspicuous that to be a successful seller on Amazon, it is very important to make use of the Fulfilled By Amazon feature as this will be of unfathomable benefits to both the buyer and the seller. Undoubtedly, there is no greater reward in a business deal than when both the buyer and seller go home happy. Let the FBA feature be the bridge that connects you and your buyers to a lifelong partnership and enjoy the rewards.
Carefully consider the pros and cons of being an FBA seller, take your time to research the Amazon market as a whole, seek wise counsel from successful FBA sellers you know and apply the counsel received, and finally, determine from the facts you have gathered if becoming an FBA seller will take your business enterprise to the very next level.