One of the key aspects to master when selling on Amazon is to account for and anticipate all your seller fees. After all, that’s the crucial element that determines your net margin – how much you put in your pocket when all is sold and done.
Many professional sellers follow the simple rule of thumb of 3 times (x3): buy or source products and sell them 3 times higher. While this simple strategy worked in the early days of FBA (fulfillment by Amazon), today is a different affair. The competition is stiffer. You need to offer competitive prices to get to buy box button while running expensive ad campaigns. How can you efficiently budget these operations if you do not perfectly control your seller and sourcing fees?
If you are already familiar with these concepts, jump to the graphs and numbers presented below. They are based on Arbitrage Idea’s database of collected products. These are real Amazon data gathered for around 15 000 items. The fees have been calculated using Amazon FBA Calculator.
Amazon selling fees
No matter how you sell on Amazon (through FBA or your own fulfillment), you will be subject to at least three seller fees:
- Referral fees: basically Amazon’s commission
- Amazon seller fees: the price to pay either monthly or per item to access the Amazon selling store
- Variable closing fees: additional fee that applies for certain categories
Amazon Referral fees
These fees are literally Amazon’s commission on every transaction. They can amount to anything from 6% (Personal computers) to 45% (Amazon Device accessories) depending on the item’s category. The fee’s breakdown per category is presented here. I would like to stress that these fees only depend on the item’s category and its price. It has nothing to do with its weight, height, length or width.
Amazon seller fees
These fees simply reflect the privilege to have an Amazon seller account. For sellers registered as individuals, it amounts to $0.99 per item sold. If you opt for a business or corporate account, you are required to pay $39.99 per month. You also unlock the ability to sell in some categories and other advantages. This fee is the least interesting of them all because it has nothing to do with the product you are sourcing.
Variable closing fees
These fixed fees of about $1.8 per item are added to the mix when the item sold belongs to one of the following categories:
- Video Games
- Software & Computer/Video Games
- Video Game Consoles
This fee applies as soon as you sell a product in these categories, no matter what the product is. You can sell a basket ball hoop, as long as you list it in the “Video Games” category, you will be subject to this fee! (Listing an item in an unrelated category is common practice to take advantage of the absence of competition for instance)
We are only halfway through and I am sure you’re already wondering how to keep track of all these fees when choosing your next item to sell! Do not worry, all these fees are automatically displayed when browsing items on Arbitrage Ideas. Case in point:
Additional fees for FBA sellers
Since most Amazon sellers opt for FBA (Fulfillment by Amazon) to avoid the hassle of maintaining a warehouse in their basement, you will need to account for two additional fees:
- Storage fees: monthly cost of storing an item in Amazon’s warehouses
- Pick & Pack fees: cost of preparing your package in Amazon’s warehouse and prepare shipping to the client
Now here is the interesting part. These fees have no direct correlation with the price of the item you sell. The storage fees grow linearly (almost) as the volume increases :
The bigger the package the bigger the storage fees. Keep in mind that we take into account the package volume, not the dimensions of the object itself. Take the following item for instance:
The product dimensions state a total volume of 23.6 x 5.9 x 24, which might discourage you, given the storage fees associated with it, but, once neatly packed, Amazon will only charge you for the package’s volume: 7.0 x 4.1 x 23, which amounts to $0.19 in the case of this particular item:
Pick & Pack fees on the other hand depend entirely on the item’s weight:
The correlation is somewhat linear, but can jump to weird to values from time to time. It is related to the way Amazon breaks down their definitions of “standard size” and “oversize”.
The sweet spot is somewhere under 60 pounds, where the fees hover a bit below $30.
Again, tracking these fees in an excel spreadsheet while browsing products on your favorite wholesaler is absolutely bananas. That’s the power of Arbitrage Ideas, you get automatically get the net margin associated with any listing found in both the Amazon store and on Alibaba for instance. The fees are calculated automatically using Amazon’s API which makes them extremely reliable.
Give it a spin and let me know what you think.