How Amazon referral fees work and why this is AWESOME news for sellers

Learn how Amazon referral fees work and how this affects you as a seller on Amazon.
Seth Kniep
Oct 18, 2016
Start on Amazon
Understanding how Amazon referral fees work can give you peace of mind so that you understand exactly what you are paying in fees for every single transaction on Amazon. This plays a big role when calculating your costs and profits as you grow your Amazon income.

What is the referral fee?

The referral fee is a fee Amazon charges you every time you sell a product. It is a percentage of the total sales price and is usually 15%. The percentage varies based on the product category and can go as low as 8% (for personal computers) and as high as 45% (for Amazon Device Accessories).

Is it ridiculous for Amazon to take 15% of my total sales price every time I make a sale? 

No. Let's say you sell houses for a living and my friend, Bobby McGee, wants to buy a house. I tell Bobby you can help him, and Bobby buys a house from you. You pay me a “referral fee” because I referred Bobby to you. I brought you the sale. It's sort of like my commission. Instead of you having to go out and spend hours of marketing before finding Bobby, I brought him straight to you and gave you the sale. Well, instead of houses, you're selling products on Amazon.

Amazon's platform is bringing you customers (hopefully thousands!), so they have every right to charge a referral fee for referring the customer to you.

If you were selling products off of your own website, you would likely spend 10s of thousands of dollars in marketing or a minimum of six months content marketing before you started making serious money from your own store. Amazon lets you get results far faster than any ecommerce platform I have ever seen.

How is the Amazon referral fee calculated? 

Amazon calculates the percentage (usually 15%) of the price the customer pays. For example, if you are selling invisible socks for $100 but decided to run a sale for $80 then Amazon calculates the fee off of $80, not $100.

$80 x .15 = $12 referral fee.

If you are shipping the items yourself FBM (fulfilled by merchant), and the customer pays you $2.89 for shipping, then the fee is calculated like this: 

($80 + $2.89) x .15 = $12.43 in referral fees.

If the customer pays gift wrapping charges, then the fee will be calculated off the total cost of the sale price + shipping cost + wrapping charges.

But the fee preview in Seller Central does not change when I run a sale!

That is correct. Don't let this deceive you. You will only pay the fee percentage based off the price the customer pays—regardless of what the fee preview says in Seller Central. The "$4.66" below shows you the full FBA fees. 

Amazon Referral Fees

If you click on the drop down arrow on the fee preview, it will show you the referral fee based on the original price of your product.

Amazon Fee Preview
Is there a minimum referral fee Amazon will charge me? 

Yes! If the price of your item is so low that the referral fee percentage would be lower than $0.30, then Amazon will charge a minimum $0.30 referral fee.

For example, if you are selling a toothpick for $1.00 (it's an awesome, unbreakable toothpick) and the referral fee is $0.15, then you will have to pay a minimum $0.30 referral fee instead of $0.15.

Amazon applies the minimum referral fee on a per-item basis, meaning the category type has no impact on this, and it is usually based on the type of item. For practical purposes, Amazon almost always charges the minimum referral fee.

I created a full breakdown of every Amazon FBA fee in a simple spreadsheet format. I will show you where you can download it at the end.

Everyone pays a referral fee—regardless of your account type or fulfillment type.

Whether you have an individual selling plan or a professional selling plan, you still pay the Amazon referral fee.

If you have an individual seller account, you pay a fixed closing fee of $.99 for every item you sell in addition to the referral fee.

If you have a professional seller account, you pay a $39.99 monthly fee, and you do not pay a fixed closing fee. You also receive powerful seller tools and insights with the professional selling plan. So once you are selling at least 40 items per month, you should upgrade to the professional selling plan not only to save money on fees but also to take advantage of the huge benefits that come with it such as volume listing, management tools, eligibility to compete for the buy box, and much more.

You can further compare the two account types here. 

Whether you are selling the item FBM (shipping it yourself as the merchant) or FBA (Amazon fulfills the order for you), you still pay the referral fee.

If you are fulfilling orders for your product sales FBM, then the referral fee is the percentage of the combined item price plus the shipping amount you are charging. For example, if you are selling a Harry Potter wand for $10 and you charge your customers $2.25 for shipping, then your referral fee will be 15% of ($10 + $2.25) = $1.84.

The referral fee adjusts for discount coupons and claim codes.

If you offer your product at a discount so that your customer can type in a discount code at checkout (called a "claim code"), then Amazon referral fee will be a percentage of the sale price instead of the pre-discounted price. In Seller Central, the fees on your product will say the full price like this...

Seller Central

But when you sell your product at a discount, you are only charged a percentage of the discounted price.

For example, if you are selling a toothbrush for $20 (it's a really awesome toothbrush), your referral fee is normally 15% of $20 (which is $3). If you offer your customer a 50% discount claim code so that they get the toothbrush for $10, you are only going to pay a referral fee of $1.50—which is 15% of the $10.

Next time you cringe at the referral fee, remember the massive advantages for selling on Amazon.

If you were selling your products on your own website, you would be spending a much larger percentage of your budget on marketing than you pay Amazon for selling on their platform. A massive percentage of all sales in the US happen on Amazon alone, so selling on their platform takes care of a ton of marketing demands you would otherwise have to do yourself. Many Amazon sellers who get angry about the fees don't understand marketing or the favor they are receiving when they can sell their product on such a popular platform.

Amazon did over $386 billion in net revenue a year in 2020, has over 300 million users (150 million of which are Prime users), and gets 55% of all web shopper searches in the United States. Just having your product on Amazon increases buyer trust. Shoppers would much rather buy from Amazon than a website they never heard of before. The groundwork has been done for you—leaving you free to focus on the right products to sell.

I am blown away every single day at how many potential products sit on Amazon, waiting to be discovered by sellers. Go build your empire!

Get the Amazon Seller Fees Breakdown sheet here.

 

Get the

FBA Fees

breakdown

Know your costs so you can build your business!

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Seth Kniep

Married a pearl. Fathered 4 miracles. Fired his boss. Turned a single dime into $104,857. Today, a self-made millionaire, Seth and his team of 8 badass coaches teach entrepreneurs how to build passive income on Amazon.

Dead serious about building income on Amazon with eight successful coaches in a community of badass Amazon sellers? Join the Amazon FBA Mastery membership.

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