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
October 18, 2016
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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 category and can go as low as 6% (for personal computers) and as high as 45% (for Amazon Device Accessories).

See how the referral fees are calculated here.

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 you found Bobby I brought him straight to you and gave you the sale. Well, you aren't selling houses but 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 10's of thousands in marketing or a minimum of six months content marketing before you started making serious money 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 around 15%) off 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 also known as "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 fees.

If the customer pays gift wrapping charges then the fee will be calculated off the total cost of 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. 

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.

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 $1, then Amazon will charge a minimum $1 referral fee based on your product type. For example, if you are selling a toothpick for $6 (it's an awesome toothpick made of metal from a star) and the referral fee is $.90, then you will most likely have to pay a minimum $1 referral fee instead of $.90.

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. You can download it at the end of this post.

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. The difference between individual and professional seller accounts is you pay a fixed closing fee of $.99 for every item you sell when using an individual seller account, plus the referral fee.

However, with a professional sellers account you pay a $39.99 per month fee and no fixed closing fee. You also receive powerful seller tools and insights with the professional selling plan. For this reason, 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 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 compare the two account types here. 

See the advantages of selling with a professional selling plan 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"), the Amazon referral fee is a percentage of the sale price (not the pre-discounted price). This is important because in Seller Central, the fees on your product will say the full price like this...

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

For example, if you are selling a toothbrush for $20 (it's a really awesome toothbrush) and your referral fee is 15% of $20 (which is $3) and 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. Amazon itself has such a massive percentage of all sales in the US that this alone 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 and the favor they are receiving for getting to sell their product on such a popular platform.

Amazon does over $80 billion in revenue a year, has over 54 million users (30 million of which are primer users), and gets 44% of all web shopper searches in the US. Amazon sells over 2 billion products a year. Just having your product on Amazon increases buyer trust massively beyond buying from a store website they never heard of before. The groundwork has been done for you, leaving you free to focus on the right products to sell.

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

 

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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? We created something we've never done before: the Amazon Growth Bundle full year coaching course.

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