Amazon FBA Fees: 5 Reasons You Should Monitor Your FBA Charges
Whether you’re a pro FBA seller or just starting out, monitoring your Amazon FBA fees is crucial to ensuring healthy margins for your business.
Selling through Fulfillment By Amazon (FBA) comes with a lot of benefits.
For one, it’s highly convenient especially for small to medium businesses who don’t have the manpower and logistical resources to quickly and effectively manage a large amount of inventory.
Second, it makes your products eligible for Amazon Prime. According to Statista, Amazon Prime has 112M subscribers in the US alone. Having prime eligibility means more possible customers and sales. FBA items may also be sold in international markets so expansion becomes easier.
Third, FBA products often rank higher on Amazon search. That means you get easily found by your target customers compared to non-FBA products.Amazon also handles the customer service for FBA items. That means less time and money spent handling customer inquiries and processing returns or refunds.
With FBA, sellers only worry about finding and selling a great product. There’s a catch, of course: you have to be willing to pay Amazon FBA fees to enjoy all these perks and benefits.
Understanding Amazon FBA Fees
Think of FBA fees as your payment for Amazon taking care of all the fulfillment, delivery, and customer service aspects of your business.
Amazon charges you a fixed amount per product instead of you directly incurring costs for storage, warehousing, packing, shipping, delivery, and returns.
Since Amazon operates at a really large scale, doing FBA allows you to benefit from some of the cost-savings generated by their operations. Going the FBA route is often cheaper and less risky compared to, say, renting your own warehouse for product stocking and hiring a lot of employees to manage inventory.
What FBA fees are charged?
Amazon FBA fees usually fall into 5 categories: platform, referral, fulfillment, storage, and inventory management-related fees.
1.Monthly Amazon FBA fee
You have to subscribe to a monthly selling plan in order to sell on the Amazon marketplace. There are currently two options for this:
Individual Plan – You pay a fixed $1 fee for every item you sell on Amazon. This is great for sellers who are just starting out and don’t expect to sell more than 40 products each month.
Professional Plan – You pay a fixed monthly fee of $40 to be able to sell on the Amazon marketplace.
2. Amazon referral fees
Amazon levies a sales commission for every item sold on Amazon. The commission percentage varies depending on the product category. This is on top of the selling plan fees, which are the equivalent of the monthly subscription payments that Amazon collects from third-party sellers.
3. Amazon fulfillment fees
Fulfillment fees cover expenses related to the movement of your inventory. This includes picking, packing, shipping and providing customer service for your FBA item.
Amazon fulfillment pricing is currently based on the product weight and size. However, this will soon change with the implementation of increased fulfillment fees on June 1, 2021. In the new fee structure, Amazon has done away with the packaging weight adjustment. FBA fulfillment fees will be based solely on shipping weight.
Here’s a comparison of the old and new fulfillment fees for non-apparel products:
Meanwhile, here are the changes to the fulfillment fees for apparel items:
You should also expect to be charged a returns processing fee for orders that are returned by customers under a free return shipping offer.
4. Amazon FBA Storage Fees
Amazon FBA sellers pay fees for storing their products in Amazon warehouses or fulfillment centers (FC). This is an unavoidable part of your decision to go with FBA. Storage pricing is on a per cubic foot basis so larger items naturally incur higher fees.
There are two kinds of FBA storage fees:
Monthly Inventory Storage Fees – This is the monthly cost of product storage in the Amazon warehouse. Monthly storage fees can go from $0.78 per cubic foot to $3.63 depending on whether you carry standard-size or oversize items and on the season or time of year. The fees are also higher for items that require special handling and storage, such as those sold through the FBA Dangerous Goods (Hazmat) program.
Long-Term Storage Fees – This is what Amazon charges you when your items are stored for over 365 days in the FC.
5. Inventory Management-Related Fees
In addition to fulfillment and storage fees, you also need to pay for a host of other inventory-related charges:
Removal order fees – You get charged per item when you request for Amazon to either return or dispose of your stored inventory sitting in the warehouse.
Unplanned service fees – Amazon has specific guidelines for inventory packaging and labeling. So expect to pay the unplanned service fees on a per-item basis when yours arrive at the fulfillment center and they don’t meet the guidelines.
Why you should monitor your FBA charges
Now you see that Amazon charges sellers a lot of different fees. As an Amazon seller, you need to keep track of how all these fees ultimately add up and affect your profitability.
High fulfillment costs
It’s not uncommon for Amazon sellers to experience robust sales and yet suffer from losses in their FBA business. Some inexperienced sellers, for instance, neglect to account for the fulfillment fees in their cost calculations. This is a costly mistake that can run your business to the ground.
Remember that FBA fulfillment fees are charged on a per item basis and can include more than just packing and shipping. Make sure to plan for returns and other contingencies.
Frequent changes to Amazon FBA fees
Amazon frequently changes the FBA fee structures. This can put your cost calculations off if you’re not careful. For instance, storage fees are often higher during busy seasons.
Price increases during busy times are Amazon’s way of pushing FBA sellers into moving their inventories faster. You need to keep track of these changes so you can adjust your inventory management plans accordingly.
Surprise inventory transfer fees
There are times when Amazon transfers your inventory from one Fulfillment Center to another. The bad news is, you incur fees for these even if you did not request the transfer. It’s up to you to keep on top of these transfers so you’re not racking up unnecessary fees without your knowledge.
Overcharged FBA storage fees
A lot of Amazon sellers discover only too late that they’ve been charged more than they’re supposed to for storage.
Amazon has a successful and efficient system for processing millions of products in their warehouses. However, that doesn’t mean that mistakes don’t happen.
With the sheer volume of items that Amazon warehouses take in and out on a daily basis, it’s prudent to assume that things will fall through the cracks. A common cause of fee overcharging, for instance, is wrong measurements during inventory intake. Amazon doesn’t measure and scan each and every single one of your items, so it’s easy for your fees to be driven up by packaging inconsistencies.
Incorrectly charged FBA fulfillment fees
Mistakes are also common with FBA fulfillment fees. A lot of Amazon sellers, for instance, complain about their products being erroneously charged for the wrong size tier. Since the fulfillment fee is charged on a per item basis, these charges ultimately become very costly when they happen enough times and for a long time.
This issue has become some sort of a recurring nightmare for some sellers, who discover and correct the error on one of their ASIN only to find it again on a different ASIN.
Plug the profit leaks from wrong Amazon FBA fees
Incorrectly charged FBA fees can significantly affect your business performance.
Fortunately, Amazon allows you to file reimbursement claims in the event that there are mistakes in your FBA charges. Of course, you first need to check if your issue is eligible for a refund.
From our experience though, the process itself of manually checking each and every item in your store for FBA fee errors can be both cumbersome and resource-draining. This is what led us to create Seller Repay, an FBA reimbursement tool for Amazon sellers that simplifies the entire process of finding inaccurate Amazon FBA fees to filing your refund claims. The best thing is, you can create an account for free and start using the tool immediately. There are no monthly fees either; Seller Repay will only charge you a minimal fee when you use it for a claim and get an actual reimbursement.
Monitoring your FBA fees as an Amazon seller is crucial in identifying areas where you might be able to prevent high fees or at least minimize their impact by recouping through refund and reimbursement when eligible.
Rob McCartney is the CEO and co-founder of Seller Repay. He is also a longtime Amazon seller and is the owner of All Things Accessory Ltd. Launched in late 2013, All Things Accessory has gone on to enjoy great success on the Amazon platform, becoming a recognised brand producing a range of high-quality health & fitness products. Rob began his Seller Repay journey during the summer of 2020. Initially designed as an ‘in house’ system to help mitigate his own FBA losses, Rob quickly realised it could greatly benefit the rest of the FBA seller community. Seller Repay is the result of a ceaseless drive to develop an easy-to-use system that takes the stress out of Amazon reimbursements. Hundreds of hours of research and development have gone into creating a tool capable of delivering consistently reliable results for its users.