Selling on Amazon involves several fees and the various fees can be confusing. Here's some help explaining the various fees involved when you sell on Amazon. The examples and links below are in reference to Amazon.com for Amazon in the USA.
The Types of Fees Charged by Amazon
The main fees can be broken down into:
- Referral Fees
- Fulfillment Fees
- Inventory Storage Fees
- Inbound Shipping Fees
Amazon Referral Fees
In Amazon seller lingo, "Referral Fees" refers (no pun intended) to the commission you pay Amazon to sell on their platform. The Referral Fee is charged whether you sell as Merchant Fulfilled* or via Fulfillment by Amazon (FBA)*.
*Merchant fulfilled simply means the seller will fulfil orders themselves. In other words, a seller that handles shipping to customers is Merchant Fulfilling. If you've ever handled your own fulfilment, you'll know this also means storage of stock, packing and shipping each individual order, which can be a real time and labor intensive job.
This is part of the reason why Fulfilment by Amazon or FBA in short, is such a game-changer. FBA enables you to outsource storage and order fulfilment to Amazon. The added bonus is anything sold via FBA is automatically eligible for Prime shipping since it's storage and delivery is handled by Amazon's huge fulfilment network! Prime shipping is a huge deal. I'm an Amazon Prime member and I almost always only buy products that are Prime eligible.
This is part of the reason why Fulfilment by Amazon or FBA in short, is such a game-changer. FBA enables you to outsource storage and order fulfilment to Amazon. The added bonus is anything sold via FBA is automatically eligible for Prime shipping since it's storage and delivery is handled by Amazon's huge fulfilment network! Prime shipping is a huge deal. I'm an Amazon Prime member and I almost always only buy products that are Prime eligible.
The Amazon Referral Fee is charged for every sale you make through Amazon's website. It's typically 8% to 15% of each order and includes the payment processing fees for the orders that are handled by Amazon on your behalf.
As a comparison, if you sell on your own website (Shopify, WooCommerce, etc.) and use PayPal for payment processing, you would be charged 3.9% plus SGD0.50 (this is the PayPal fees for Singapore registered PayPal sellers. PayPal fees are different depending on your country, but are around this price range).
This means Amazon charges around 10% more compared to the per sale costs of my self-maintained webstore. However the advantages are that customers trust Amazon and Amazon has a much larger captive customer base than my little website!
Here's a table of Amazon USA's referral fees f
As a comparison, if you sell on your own website (Shopify, WooCommerce, etc.) and use PayPal for payment processing, you would be charged 3.9% plus SGD0.50 (this is the PayPal fees for Singapore registered PayPal sellers. PayPal fees are different depending on your country, but are around this price range).
This means Amazon charges around 10% more compared to the per sale costs of my self-maintained webstore. However the advantages are that customers trust Amazon and Amazon has a much larger captive customer base than my little website!
Here's a table of Amazon USA's referral fees f
Amazon FBA Fees
Amazon FBA fees Fulfillment fees are the costs Amazon charges you for fulfillment, which consists of storing (warehousing), packing and shipping you products. Obviously this only applies if you are using Amazon's fulfillement service known as FBA.
We'll deal with the Amazon fulfillment fees associated with fulfilling each order first - namely packing and shipping fees for each order. Storage fees will be explained separately in the next section.
For FBA, whenever a customer buys your product on Amazon, their staff have to physically locate the product in Amazon's vast network of fulfillment centers (warehouses). There are over 70 Amazon Fulfillment Centers in the USA alone, and some are as large as 35 football fields! Imagine the logistics needed to manage your items amidst the billions of other stock units handled by Amazon!
Amazon FBA Fulfillment Fee Breakdown
FBA fees have both fixed and variable components.
Fixed fees:
Variable fees:
Manually calculating fees can be a real pain. Thankfully Amazon has a great free tool called the Fulfillment by Amazon (FBA) Revenue Calculator.
We'll deal with the Amazon fulfillment fees associated with fulfilling each order first - namely packing and shipping fees for each order. Storage fees will be explained separately in the next section.
For FBA, whenever a customer buys your product on Amazon, their staff have to physically locate the product in Amazon's vast network of fulfillment centers (warehouses). There are over 70 Amazon Fulfillment Centers in the USA alone, and some are as large as 35 football fields! Imagine the logistics needed to manage your items amidst the billions of other stock units handled by Amazon!
Amazon FBA Fulfillment Fee Breakdown
FBA fees have both fixed and variable components.
Fixed fees:
- Order Handling: $1.00. This is an "operational fee" for every order. I think of it as an administrative fee.
- Pick & Pack: $1.06. The fee for physically finding your item, packing it into a box, and labeling it with the customer's address.
Variable fees:
- Weight Handling: This fee varies depending on the size and weight of an item. You can view Amazon's tables of fees by size and weight here.
Manually calculating fees can be a real pain. Thankfully Amazon has a great free tool called the Fulfillment by Amazon (FBA) Revenue Calculator.
Amazon Storage Fees
Storage fees are charged by Amazon for keeping inventory in their fulfillment centers.
There are 2 main things to note about Amazon storage fees:
Inventory Storage Fees
This is a monthly storage fee. Note the difference in fees for Jan-Oct and Nov-Dec. Amazon only started implementing the higher storage fees for Nov-Dec recently because sellers jammed their warehouses with too much stock during Q4. In 2015, so much inventory was being shipped to Amazon that they ran out of storage space. Shipments were stuck in UPS facilities, resulting in lots of products meant for FBA being out of stock in Nov and Dec since they could not be processed.
There are 2 main things to note about Amazon storage fees:
- Inventory Storage fees
- Long-Term Storage fees
Inventory Storage Fees
This is a monthly storage fee. Note the difference in fees for Jan-Oct and Nov-Dec. Amazon only started implementing the higher storage fees for Nov-Dec recently because sellers jammed their warehouses with too much stock during Q4. In 2015, so much inventory was being shipped to Amazon that they ran out of storage space. Shipments were stuck in UPS facilities, resulting in lots of products meant for FBA being out of stock in Nov and Dec since they could not be processed.
Long-Term Storage Fees
Long-Term Storage Fee is charged every twice a year for items that have been stored in Amazon fulfillment centers for six months or more. Note the 2 tiers of fees.
Units that have been in an Amazon fulfillment center for six to 12 months as of the Inventory Cleanup date will be charged $11.25 per cubic foot. Units that have been in an Amazon fulfillment center for 12 months as of the Inventory Cleanup date will be charged $22.50 per cubic foot.
The Long-Term Storage Fee is in addition to the regular Inventory Storage Fee.
To avoid Long-Term storage fees, you can do a couple of things:
- Create a removal order to remove (send back to yourself or an Amazon FBA prep service) or dispose of the units prior to the date of the fee being charged on Feb and Aug 15 each year.
- Do not overstock inventory. I usually send only 1-2 months worth of stock in FBA inventory at a time. This kepps my overall monthly storage fees low and also minimizes my chances of incurring Long-Term Storage Fees or having to go through the hassle of removing inventory.
A point worth understanding about Long-Term Storage Fees is that it is only charged on units that have been there for MORE THAN 6 months. Therefore if you are sending in a large quantity, it might be worth timing your shipment to maximize the window you have to before Long-Term Storage Fees are applicable.
For example if you send in stock in late February, when Long-Term Storage Fees (LTS) are assessed on Oct 15, these units would not incur LTS because they have been there for less than 6 months. The next LTS assessment would be Feb in the next year, therefore you effectively can store your stock with Amazon for almost 12 months without incurring LTS!
For example if you send in stock in late February, when Long-Term Storage Fees (LTS) are assessed on Oct 15, these units would not incur LTS because they have been there for less than 6 months. The next LTS assessment would be Feb in the next year, therefore you effectively can store your stock with Amazon for almost 12 months without incurring LTS!
Inbound Shipping Fees
The final fee we are going to look at here is Inbound Shipping.
This is only applicable if you use Amazon's partnered carriers (UPS and FedEx) to ship domestically within the USA to Amazon through Amazon Seller Central.
Amazon is currently partnered with UPS and FedEx to offer deeply-discounted shipping for sellers to ship their inventory into Amazon's fulfillment centers. The deeply-discounted UPS partner rates only apply to domestic shipments.
There is no fixed rate table for Inbound Shipping as there are too many possible variable factors that go into the price calculation such as where you are shipping from, which Amazon Fulfillment Center or Centers you are shipping to, the number of boxes, and sizes and weights of the boxes. You will be able to see a quotation of the Inbound Shipping fee near the end of the shipping plan creation process in Amazon Seller Central (the seller portal used to manage your Amazon seller account).
Based on my own personal experience having shipped tens of thousands of units to Amazon, my Inbound Shipping fee per unit has ranged from 7 cents to $1. My average in the last couple of years is around $0.30 or less per unit as I've refined my ordering from suppliers and prep to send at least 100 unit at a time to Amazon for FBA.
This is only applicable if you use Amazon's partnered carriers (UPS and FedEx) to ship domestically within the USA to Amazon through Amazon Seller Central.
Amazon is currently partnered with UPS and FedEx to offer deeply-discounted shipping for sellers to ship their inventory into Amazon's fulfillment centers. The deeply-discounted UPS partner rates only apply to domestic shipments.
There is no fixed rate table for Inbound Shipping as there are too many possible variable factors that go into the price calculation such as where you are shipping from, which Amazon Fulfillment Center or Centers you are shipping to, the number of boxes, and sizes and weights of the boxes. You will be able to see a quotation of the Inbound Shipping fee near the end of the shipping plan creation process in Amazon Seller Central (the seller portal used to manage your Amazon seller account).
Based on my own personal experience having shipped tens of thousands of units to Amazon, my Inbound Shipping fee per unit has ranged from 7 cents to $1. My average in the last couple of years is around $0.30 or less per unit as I've refined my ordering from suppliers and prep to send at least 100 unit at a time to Amazon for FBA.