It’s important to understand what the different Amazon seller fees are, and why you’re being charged. Amazon fees don’t have to be complicated or frightening.
There are three primary Amazon fees every seller should know about: storage fees, Amazon fulfillment fees, and referral fees.
#1: Storage Fees
Monthly inventory storage fees are the fees you pay to have your products stored in Amazon’s warehouse. Every month, Amazon will charge you a certain fee for every individual item you are storing in their warehouse. The charge is based on how many cubic feet of warehouse space your products are taking up. Make sure Amazon has double- and triple-checked these measurements so you don’t get overcharged.
Monthly inventory storage fees will be charged between the 7th and 15th of every month. Storage fees will also increase from October to December, during the high-volume holiday season.
How do you calculate your monthly inventory storage fees? First, measure the dimensions of your product. These dimensions include the packaging. So, if you’re selling a coffee mug, measure the box the mug is shipped in. Let’s say the packaging for your coffee mug is 10x8x4 inches. When you multiply those numbers, you’ll have the volume in cubic inches – 320. To convert that to cubic feet, divide the number by 1728 (12x12x12). 320 divided by 1728 is 0.185, making your product 0.185 cubic feet, which you can round up to 0.19.
Amazon’s standard rate is $0.64 per cubic foot. So, just multiply 0.185 cubic feet by $0.64. That’s $0.12 a month. $0.12 per month might not seem like much, but if you’re storing 20,000 coffee mugs in Amazon’s warehouse, that’s $2,400.
#2: Amazon Fulfillment Fees
The Amazon Fulfillment fee is the money you pay Amazon every time you make a sale and they package and ship your product and take care of customer service. So, you pay this fee every time someone buys your product. This fee is based on two things: the size of your product and the weight of your product. Based on these numbers, products fall into two categories, standard size and oversize, and each category has various subcategories. The fee you pay will vary based on what category your product falls into.
Before you start complaining about Amazon Fulfillment fees, it’s important to realize what a privilege and a benefit it is to have Amazon fulfill your orders for you. You save time and avoid hassle by paying Amazon to prepare and ship your products for you, and to deal with customer service and any returns. Customers trust Amazon, and having your orders fulfilled by Amazon adds a level of legitimacy to your sales.
#3: Referral Fees
A referral fee is the fee you pay Amazon for the privilege of selling on their platform. Shoppers trust Amazon, so selling your product on Amazon makes it easier to get sales. There’s nothing wrong with starting your own e-commerce website, but Amazon is the best place to start building your customer base. Essentially, you pay for Amazon to refer customers to your products.
The referral fee varies based on category. Typically, it’s 15%, but it can range anywhere from 6% to 45%. Imagine you’re selling a product for $21. 15% of $21 is $3.15, so that’s your referral fee for that product. Amazon also has a minimum referral fee of $1, so for every product you sell, no matter how inexpensive, you’ll always have a referral fee of at least $1.
The referral fee is based on the total price of your product, so if your product is discounted, for example, the referral fee will adjust accordingly.
Storage fees, Amazon Fulfillment fees, and referral fees are the three main Amazon seller fees – but there are three other important fees that sellers often don’t talk about enough.
#4: Long-Term Storage Fees
If your product isn’t moving and it sits in Amazon’s warehouse for too long, you’ll be charged. After six months, your normal storage fee will increase, and after 12 months, it will increase again.
To avoid paying massive fees for long-term storage, be aware of how fast your inventory is going to move and know how much inventory you really need to keep on hand.
#5: Refund Administration Fees
When Amazon conducts a refund for your customer on your behalf, they retain 20% of the referral fee as a fee for their work administering the refund.
So, if the referral fee for your product is $3.75, and a customer returns that product, Amazon will take 20%, or $0.75, of that referral fee, meaning you’ll only get $3.00 of the referral fee back. To avoid this, make sure you thoroughly research potential products and find something with a low risk of being returned.
#6: Variable Closing Fees
Variable closing fees apply to media items, such as CDs and DVDs. If you are selling any media items, you’ll be paying a fee of $1.80 for every sale.
If you want to make money on Amazon, it’s just as important to know how much you’re spending as it is to know how much you’re making. To keep track of how much you’re spending in Amazon fees, you need to understand what those fees are. If you don’t keep track of Amazon fees, they might start eating into your profits, and it doesn’t matter how many sales you make if those sales aren’t profitable.