For those interested in starting an e-commerce business, Fulfillment By Amazon (FBA) is often the choice that makes the most sense due to being able to outsource shipping and warehousing. However, the fees associated with the service can be a little confusing. We’re going to break down what constitutes the FBA fees you’ll be paying and how you can manage them to maximize your income.
FBA Fee Types
There are three main types of fees to learn about as you begin planning your FBA business. These can vary slightly, but knowing roughly how much you’re looking at ahead of time can help you price your items properly and know how much capital you will need going in.
- Referral Fee: This fee is the standard selling fee that each Amazon seller must pay. The standard fee is 15 percent, but this can vary from 8 percent to 45 percent depending on what product category each item sells in. Take the time to research each product category you’ll be using to know how much you’ll be paying Amazon to use their service.
- Selling Fees: This fee type varies depending on whether you are a ‘professional’ or ‘individual’ seller with Amazon. Individual sellers pay an additional 99 cent fee for every item sold. Professional sellers have to pay $39.99 per month, but do not have to pay that 99 cent fee. Closing fees are also included in this. Closing fees are paid by both individual and professional sellers, and also vary by product category.
- Order Fulfillment Fees: These fees are determined by the size and weight of your product, and covers the costs of picking and handling the order.
Tips to Minimize FBA Fees
These fees can add up quickly, so it is important to ensure you’re not paying any more than you have to. Below are some tips you may want to consider to help minimize the amount you’re paying Amazon for the privilege of conducting business on its website.
- Consider product sizes carefully. The larger and heavier a product is, the more you’re going to pay in storage and handling fees. If you’re considering selling a heavy product, calculate these fees ahead of time to ensure you can actually make a profit on selling.
- Manage inventory carefully. There are several ways that carefully managing your inventory can help save you money. You want to be sure that you always have stock on hand, of course, as any out-of-stock time can be costing you money through lost sales. However, Amazon also charges storage fees, which can add up quickly. Additionally, the company charges long-term storage fees for items that have been on the shelves for longer than six months.
- Create a shipping plan. This one is up for debate. Many sellers prefer to let Amazon come up with a shipping plan for them, as the company uses algorithms and trials to see where it might be best to warehouse your items. However, you can end up being charged as Amazon shuffles your products between warehouses. Putting together a shipping plan with the help of Amazon is preferred by some sellers so that they can dictate where their products will be stored and shipped from.