What is Amazon FBA?
For the uninitiated, Amazon FBA or "Fulfilment by Amazon" is a service offered by the e-commerce giant that stores your products in Amazon's fulfilment centres. They handle storage, packaging, and shipping, along with customer service and returns for these products. In essence, Amazon FBA frees up your time to focus on growing your business rather than managing logistical details. But there's a catch - FBA comes with its own cost structure, which if not understood correctly, could eat into your profit margins.
Our guide to Amazon FBA Fees is crucial for anyone looking to maximise profit in their Amazon business. By understanding and optimising these fees, you're taking a giant leap towards smarter operations and healthier bottom lines. So, let's get started!
Different FBA Fees to Consider
Amazon FBA fees encompass a range of different costs, each with its own method of calculation and application. There are three main types of fees: Fulfilment Fees, Storage Fees and Referral Fees.
Amazon FBA Fulfilment Fees
The Fulfilment Fees are essentially charges for Amazon picking, packing, shipping, handling returns, and providing customer service for your products. These fees are primarily based on the weight and dimensions of your product, with specific rates for standard-size and oversize items. It's important to note that Amazon distinguishes between shipping weight and unit weight, incorporating the packaging into the overall fee calculation.
Amazon FBA Storage Fees
When it comes to storing your products in Amazon's warehouses, Amazon charges two types of storage fees: Monthly Inventory Storage Fees and Long-Term Storage Fees.
Monthly Inventory Storage Fees apply to all items stored in an Amazon fulfilment centre based on the calendar month and your daily average volume of inventory. The fees are calculated per cubic foot, and the cost varies depending on the time of year. For instance, from January to September, the cost is typically lower, but it increases during the peak selling season, which is from October to December.
On the other hand, Long-Term Storage Fees are assessed if your inventory stays in Amazon's fulfilment centre for more than 270 days. This fee is charged per cubic foot, and it's considerably higher than the regular monthly storage fee. The aim is to encourage turnover and prevent Amazon warehouses from being used for long-term storage.
Remember, Amazon calculates the volume based on the unit size when properly packaged and ready for shipment to customers in accordance with FBA policies and requirements. Understanding how these storage fees work and incorporating them into your pricing strategy is vital to ensure profitability and efficiency in your Amazon FBA business.
Amazon FBA Referral Fees
Amazon Referral Fees are another crucial component to consider when calculating your total costs as an Amazon seller. This fee is essentially Amazon's commission for allowing you to sell on their platform. It is charged per item sold and is calculated as a percentage of the total sales price, including any shipping or gift wrap charges, but excluding any taxes collected through Amazon tax calculation services. The percentage varies by category, ranging typically from 6% to 45%, with an average of around 15%. For instance, if you sell a book priced at £20, and the referral fee for books is 15%, you would pay Amazon a referral fee of £3. Understanding and factoring in Amazon Referral Fees are essential, as they can significantly impact your bottom line and pricing strategy.
Apart from these three, there are also additional fees that can be levied for services like removal orders or for items that require special handling.
The key takeaway here is that these costs should be carefully considered when sourcing products. Too often, sellers focus solely on the purchase price of goods without factoring in FBA fees. This can lead to a severe underestimation of your true costs, squeezing your margins thin. To maximise profits, it's critical to incorporate these fees into your product cost from the get-go. They should be integral to your pricing strategy and sourcing decisions, ensuring that every product you sell via Amazon FBA contributes to your financial success.
Working with Prep365
Prep365 is an FBA prep centre, offering a product preparation service for Amazon FBA sellers. We're here to save you valuable time and energy so that you are able to focus on other aspects of the business. Find out more about our pricing.
As an FBA prep centre, we receive your products, quality inspect them, create the shipping plan, prepare them as required and dispatch them. We offer a super-quick turnaround time with banded pricing, always with your bottom line in mind. Find out more about Our Services here.