Have you heard about the wonders of 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 legit way to streamline your storage, shipping, and customer service. You can operate anywhere, any time, and still guarantee reliable, on-time delivery.
However, it’s not free.
You have plenty of Amazon FBA fees to consider, and these are on top of normal referral, refund, and selling fees.
Yet, don’t let the trigger word “fee” deter you. Despite the extra cost, there’s a good chance Amazon FBA is still worth the investment—both from financial and work-life balance perspectives.
Below, we’re going to break down each Amazon FBA fee to help you understand where every penny of your money is going. We’ll also give you calculators to help estimate your costs and expected ROI.
But first—is Amazon FBA worth all the hassle of calculating these fees?
Why Sell Through Amazon FBA?
Amazon FBA might have a few extra costs, but you get a whole lotta bang for your buck. Here are a few reasons you should consider it:
- Piggyback on Amazon’s Reputation: Consumers trust Amazon. When they make a purchase, they know that they’re going to get it (in days, not weeks).
- Provide Super-Fast Shipping: Today’s modern shoppers expect 2-day delivery. Anything more than that, and you’re behind the times. With Amazon FBA, you can keep up with the expedited shipping of even your biggest competitors.
- Consolidate Your Processes: Tired or wary of managing a warehouse, customer service representatives, and shipping teams? Hand it all off to Amazon FBA’s one-stop shop.
- Hand Off the Nitty-Gritty Work: Running a business is hard enough without having to do all the packaging, labeling, shipping, and customer service yourself. You have bigger fish to fry—hand off the minutiae to someone else.
- Work (or Don’t) On Your Schedule: When you work with Amazon FBA, your products get processed, delivered, and returned on time—whether you’re in the office or on a beach somewhere.
7 Amazon FBA Fees
Now that you’re hyped about Amazon FBA let’s look at the fees you can expect. Remember, we’re going through a list of Amazon FBA fees—not all of your expenses. You’ll still have general Amazon fees (per-item fees, referral fees, closing fees, etc.), manufacturing, website hosting fees, and more.
Here are the 7 Amazon FBA fees:
1. Amazon FBA Fulfillment Fee
The FBA fulfillment fee is also known as the pick-and-pack fee. Amazon charges a per-unit fee to find, label, and ship items to customers. The fee is determined by the item’s size, weight, and category. Check out Amazon’s rate cards to determine what fulfillment fee you’ll be charged per unit.
First, look at your product type. Next, figure out the sizing tier. Need help figuring out what size package you have? Look at how Amazon determines the product size tier here. After that, you’ll use the shipping weight to determine your per-unit fee.
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 the time of the year.
For example, it often gets more expensive to stock up on inventory just before the holiday season because Amazon has to store extra inventory (for all the other businesses) at that time.
However, you don’t have to guess at this number. Amazon provides rate cards to help you determine your FBA storage fees each month of the year.
3. Amazon FBA Long-Term Storage Fee
Unfortunately, Amazon FBA isn’t somewhere you can just stash your extra inventory—especially if it’s not selling quickly. Amazon charges a long-term storage fee for any item left 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 make sure you check Amazon’s inventory health manager to identify which items have storage limitations.
4. Amazon FBA Disposal Order Fee
You may want to discard old product that’s not selling and accumulating storage fees. FBA will dispose of your products for you, but it’ll cost a fee. Prices vary depending on the size and shipping weight of your products.
5. Amazon FBA Removal Order Fee
Removal and disposal aren’t the same things. Submit an FBA removal order if you’d like Amazon to return your inventory to you—submit an FBA disposal order if you’d like them to go ahead and trash it.
Removal order fees also vary depending on the size and weight of your products. Note that the prices of a disposal order and removal order are the same. However, if you request a removal order and then decide to dispose of it on your own, that’s likely going to cost you a separate bill with your landfill (unless you’re selling sticky notes).
6. Amazon FBA Unplanned Service Fee
Amazon has strict rules for preparing and labeling your products before shipping them to fulfillment centers. Get it wrong, and you’ll have to pay a per-item fee for them to correct it. These mistakes can also cause selling delays.
7. Amazon FBA Returns 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 give your products a try, it might jack up your return rate—and returns aren’t free for you.
You’ll be charged a per-item returns processing fee for any items in the apparel and shoe categories. Returns process fees can be expensive. For example, you could end up paying $2 to $43 per item if your customers make a return.
Amazon FBA Fee Calculator
Don’t want to get out your smartphone and crunch the numbers yourself? No sweat. You’re an entrepreneur—you don’t have to be a mathematician, too.
Try out this plug-and-play Amazon FBA fee calculator to let them do the crunching for you. This is Amazon’s calculator, so you can be confident it’ll be just about spot on.
How to Use Amazon’s FBA Fee Calculator
Using the calculator is pretty straightforward. First, find the product you want to sell on Amazon. If you can’t find the product (or it doesn’t exist yet), enter the estimates for the weight and packaging dimensions.
Next, plug in the self-fulfillment details such as the price of the item, typical shipping costs, storage fees, and cost of goods sold. Once you’re finished, click the yellow button, “Calculate.”
The Amazon FBA fee calculator will process the estimated costs and ROI for fulfillment by you and Fulfillment by Amazon. You can see the head-to-head net profit and margins for the two options.
However, don’t let this final number be the deciding factor. Remember the valuable time you could save that the calculator doesn’t represent.
For example, selling through FBA might yield a little fewer dollars profit per transaction, but it could be saving you countless hours of work. That’s time you could be spending managing your business and planning for the future.
Read more: What to Sell on Amazon: 8 Tips to Find Profitable Products
Is Amazon FBA Right for Your Business?
That’s for you to decide. Once you’ve done the math and determined the costs, it’s up to you to figure this out.
There’s not necessarily a right or wrong answer, either. Amazon FBA might be a no-brainer for some startups, while others prefer to control the entire shipping and delivery process.
You also need to keep in mind that the decision to use Amazon FBA isn’t all about the numbers. Other factors should go into your consideration, like customer service, branding, and return frequency.
For example, when you ship with Amazon FBA, you’ll lose creative power over your packaging materials. If that’s an important factor to your brand and product experience, then FBA might not be the right option for you.
Ready to Master Amazon FBA?
The world of Amazon FBA is vast, exciting, and brimming with potential. However, it’s far from simple.
Instead of learning through trial and error, expedite your journey from beginner to FBA pro with our free training: How to Sell on Amazon FBA.
Melisa Vong will be your instructor, and Jeff Bezons practically paid for her house. She’s launched 2 multi-million dollar brands on Amazon using her “Prime Product Method,” and now she’s breaking down her formula for success for you.
The post Amazon FBA Fees: How to Calculate What FBA Will Cost You appeared first on Foundr.
