For an entrepreneur, Amazon is a great marketplace to start a business. It provides sellers instant access to millions of potential customers that would not be available if they created their own website.
However, it’s essential to understand the costs involved before starting. This article will break down the different Amazon selling fees and explain other costs you’ll need to consider while showing you a few ways to save money from the very beginning.
The Cost of Amazon’s Selling Fees
Being part of Amazon’s massive marketplace isn’t particularly cheap. There are many selling fees to take into account:
Referral fees
This is the fee Amazon charges you for accessing its 200 million Prime Members. That’s why it’s applied to every product you sell on the platform. It has a bare minimum of $0.30 charge per sale, but it is a percentage that varies depending on the type of product you’re selling.
For example, let’s say you’re selling clothing items and accessories. Well, then Amazon would charge you 17% on every sale. That means that if you sold a pair of jeans for 20$, Amazon would keep $3.40.
You can see the whole Fees Table here.
Monthly subscription Fees
If your company sells more than 40 products per month, you should subscribe to Amazon’s professional seller plan, which costs $39.99 monthly. Otherwise, you can stick to Amazon’s free individual seller plan. Remember that if you do this, you pay Amazon $0.99 for each product you sell on the platform.
Amazon FBA Fees
If you’re part of Amazon’s FBA (Fulfilled By Amazon) program, there will be several exclusive fees you’ll have to consider.
- Pick and Pack Fee: As the name suggests, this is the fee Amazon charges you for packing up your product, delivering it, and all the handling in between. Basically, the bigger your product is, the more you’ll have to pay. The fee you end up paying will depend on the size of your product once it’s fully packaged. See the following product size tiers:
The fee will be higher or lower depending on how much your product weighs. Plus, there are different categories: Non-Apparel, Apparel, and Dangerous. If you´re selling Apparel, the fee will usually cost $0.40 more than Non-Apparel. The same happens if you’re selling a Dangerous product. To calculate how much you’ll pay, use Amazon’s Revenue Calculator for free. - Amazon Storage Fee: The amount Amazon charges you every month you keep inventory in their warehouse. From January to September every year, they charge $0.75 per cubic foot worth of stock you have stored. From October to December, the fee rises up to $2.40 per cubic foot.
- Long-Term Storage Fee: If you keep products in Amazon’s warehouse for more than 365 days, they charge you $6.90 per cubic foot or $0.15 per item.
- Prepping Fee: Amazon can print an FNSKU barcode for $0.55 per product. Learn more about Amazon FBA Labels.
Customer Return Fees
If a customer returns a bought product, Amazon charges you this fee. The cost depends on the size and weight of your product. If you´re on the FBA program, it covers the costs of return shipping and processing in the Amazon warehouse.
Initial investment
Before your initial investment, you must research extensively to decide what product you’ll sell. Starting on Amazon specifically can be quite a unique process. Many businesses have managed to start with smaller investments of less than $1,000. Of course, having a smaller budget means that your options will be limited.
Whatever the amount, your initial investment will have to cover the following aspects of your business:
Inventory Costs
There comes the inventory dilemma. How much of my product should I order for my first production run? After all, if you order too much and your product fails, you’ll lose money. If you order too little, you risk not having enough stock if your product is successful.
That’s why investing around $500-$1000 is initially the best choice to test out which products will sell.
Product Photo Shoots
Pictures are one of the first things customers will judge about your product. Hiring a professional photographer to capture your product’s best angles with high-quality photos will make your product stand out. The photo shoot cost depends on the product type you’re selling and the catalog list.
You could even get a professional computer rendering of your product. They’re excellent as a Main Image because they can capture your product with perfect lightning.
Supplies or Fees
If you take an FBM (Forwarded By Merchant) approach, you’ll invest in a higher cost of operations. This means you’ll spend money on tools and supplies to measure, package, and deliver your products.
If you subscribe to the FBA program, you’ll invest this money in Amazon’s FBA Fees, as developed earlier. You must consider which of these two options works best for your business.
For example, if you sell hand-made products, your presentation may be a key selling point to your customers. If this is the case, then the FBM program may work best for you to pay attention to the little details that make for the perfect presentation, thus creating a better customer experience and more sales.
Advertising
Advertising your product on Amazon will boost its reach to new customers. Sponsored Products by Amazon are a very cheap way to approach your initial advertising. The program consists of sponsoring your product on the page for a price. They are Cost per Click (CPC), so you only pay when someone clicks the ad. A high number of clicks means the ad gets attention and your product’s potential customers.
When a shopper clicks on an ad for your product, you offer the highest amount you are willing to pay. The higher your bid, the greater the chance your ad will appear when it matches a customer’s shopping search, making it more competitive.
Reducing Costs
Here are a few ways to reduce costs and save up some money when starting your business on Amazon:
- Brand Referral Bonus – The Brand Referral Bonus program credits Brands an average of 10% of sales from the traffic you have driven to Amazon. By signing up for this program, you can reduce referral fees by up to 5%. Because of this, your non-Amazon marketing also gets benefits.
- Smaller packages – If you’re in the FBA program, investing in smaller packages will save you a lot of money regarding Amazon’s Storage and Returnal Fees.
- Professional Seller Account – Getting a Professional Seller Account is worth the monthly $39.99 fee in the long term. Besides the unlimited listing, you’ll also get more benefits like inventory using feeds, spreadsheets, and reports that’ll help your business grow.
- Watching Out For Abandoned Inventory – Be careful with your abandoned inventory if you’re in the FBA program. Keep track of any products you haven’t sold and check them regularly. This way, you’ll avoid paying Amazon’s Long-Term Storage Fee.
Conclusion
Knowing the costs involved when selling on Amazon is an excellent way of getting ahead while avoiding future mistakes. Familiarizing yourself with Amazon’s selling fees is key to planning your initial investment and preventing eventual losses. But sometimes, you need more than research and good planning. Your business will not grow if your products don’t appear high on Amazon’s search results. This is where BellaVix can help you upgrade your listing and unlock your product’s full potential by boosting its visibility on the search engine.
If you have additional questions or want us to help you on your Amazon journey, don’t hesitate to contact the BellaVix Team.
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