Selling Plan Fees: Individual and Professional
Selling plan fees: The first fee Amazon sellers will encounter depends on the selling plan they choose to use. There are two selling plan options: individual and professional. The individual plan is free for sellers, it’s a great option for someone who’s looking to get a feel for selling on Amazon. Although the plan is free to start, you will have to pay $0.99 per item sold in addition to other selling fees that will be mentioned later. If you sell more than 40 products in a given month (which is very doable), it’s better to switch to the professional plan so that you won’t be charged $0.99 per item sold.
The apparent benefits of the individual seller plan is that it’s free to start and you can join the Fulfillment by Amazon (FBA) program. This is great for anyone who has a very low budget to start with and wants to get some selling experience. There are several drawbacks with starting with the free plan. First, you are limited in the number of categories you can sell in. Until you update to the professional plan, you will be restricted from selling other gated categories. Also, you won’t be able to enjoy all the other amenities that sellers take for granted like setting your shipping fees, listing items in bulk and more.
The professional plan costs $39.99 per month and it provides all the benefits that a seller can get on Amazon. This plan suits anyone that is looking to sell more than 40 items per month (95% of sellers) and it gives you access to all of the marketing and operational tools in Amazon Seller Central. One of the first benefits it provides is that it allows you to be able to apply to sell in other categories. When you first start your Amazon account, you are restricted from selling certain brands and categories. After upgrading to the professional plan, you can apply and get ungated in other categories and start selling. Other benefits include API integrations (if you use other tools), ability to advertise within Amazon and ability to qualify for top placement on product detail pages.
Referral fees: Referral fees are another type of fee that Amazon has when you sell a product. Amazon has this fee because they are referring their customers to you when you sell a product. Without Amazon’s platform, you would not be able to reach the millions of customers that already have their credit cards on file and are ready to purchase. The referral fee can vary based on several factors. The referral fee is based on a percentage of the sale and there are minimum referral fees.
One of the factors that determine the referral fee is the category in which you are selling a product. For example, if you are selling a sports item, the referral fee would be 15% of the sale or a minimum of $0.30. This means that if you sold a $100 item, the referral fee would be $15. If you sold a $1.50 item, the referral fee would be $0.30 even though 15% of the $1.50 item is $0.23 due to the minimum fee.
Besides the Amazon device accessories category, which has 45% referral fees, all the other categories have between an 8-20% fee. Most categories are around the 12-15% range. The referral fee is the first fee you need to understand because it is taken from each item sold. If you didn’t take this into account, you may be thinking your Amazon business is making a lot of money while 15% of your profits are being taken. This is important to remember when setting the price for your product, so you can get your desired profit per item sold.
Fulfillment fees: Fulfillment fees are another major part of Amazon fees for sellers. The fulfillment fees are the costs it takes for the product to go from the seller to the end buyer. There are two types of fulfillment fees: Fulfillment by Amazon (FBA) and Fulfillment by Merchant (FBM). Each of these types of fulfillment have different fee structures and it’s important to understand them both to choose the best option for your business. Several additional factors influence fulfillment fees; these include the weight and dimensions of a product, packaging and more.
Fulfillment by Amazon (FBA): Fulfillment by Amazon is when the seller ships products to an Amazon warehouse and Amazon ships directly to the customer when the product is sold. For FBA fulfillment fees, costs are different for apparel and non-apparel items. For non-apparel items (the vast majority of products), the fulfillment fee accounts for picking and packing, shipping and handling, customer service and product returns.
The majority of FBA products are under the following categories for fulfillment: FBA small and light, small standard and large standard. The fulfillment fees for these items range from $1.97 per unit to $5.42 per unit, these fees are accurate for most FBA items. Larger items fall in the overside categories: small oversize, medium oversize, large oversize and special oversize. Their fulfillment costs range from $8.26 to $137.32. These items are very large and heavy items like laundry machines.
Apparel fees: For FBA apparel items, the small standard and large standard items range in fees from $2.92 to $5.95 per item sold. For apparel items that are small oversize, medium oversize, large oversize and special oversize, the fee structure is exactly the same as non-apparel products. The fulfillment costs range from $8.26 to $137.32.
The last two paragraphs are hard to digest by text. Here’s a table below from Amazon that shows the different FBA fee categories and the associated size of a product.
Fulfillment by Merchant (FBM): Fulfillment by Merchant is when a seller sends the product sold on Amazon directly to the end customer. This means when a product sells, all of the shipping, labeling and packaging will be done by the seller. Amazon only requires the referral fee for FBM and they charge shipping rates based on the category of the item sold. Sellers with a professional selling plan can set their own shipping rates and sellers with individual selling plans must use the rates set by Amazon.
The shipping fees set by Amazon depend on the size and weight of a product in addition to the category and the expected time it takes to ship. The domestic standard shipping costs range from $3.99 to $4.49 depending on the category of the item sold. Other types of shipping methods like domestic two-day and international expedited range from $6.99 to $46.50 depending on how fast an item is shipping and where it is shipped to globally. Below is a table from Amazon illustrating how shipping fees work for FBM.
Storage fees: Storage fees are another type of fee, but it is exclusively for sellers that sell FBA. Typically, if you do correct product research, your item will be sold relatively quickly (days or weeks). If your product is sitting at an Amazon warehouse for some time, you may be subject to some fees. Storage fees are based on the daily average volume (measured in cubic feet) for the room that your inventory takes up in a warehouse.
In addition to product size, the time of year greatly affects how much storage fees Amazon can charge you. In the early months of a calendar year (January to September), for standard size items, Amazon will charge sellers $0.75 per cubic foot. For the same standard items, Amazon will charge sellers in later months (October-Dec) more than triple that rate at $2.40 per cubic foot. This is because October through December is Q4 and Amazon does a ton more sales, so their warehouse space is prime real estate. Below is a table from Amazon showing the different rates for the different times in the year.
Amazon will charge a long-term storage fee in addition to monthly storage fees if an item is in a warehouse for more than 365 days. At that point it’s much better to take the loss and remove the item from the warehouse or it’ll be a recurring bill. There’s a removal fee for FBA items in Amazon warehouses. The fees range anywhere from $0.25 per unit to $1.90. It’s pretty cheap if it’s one product, but those fees can quickly add up if you have tens or hundreds of products. Below are the rates for FBA product removal:
That covers the majority of fees you may encounter selling on Amazon. There are some specialized fees depending on what you sell that have not been covered like book rental returns (if you offer rental textbooks) and high volume listing fees (if you have more than 100,000 listings). It’ll be impossible to remember all of that fees during your first read, I’ve linked Amazon’s fee calculator here and that puts everything together. You can put the cost of goods, see the referral and fulfillment fees and that should give you a great estimate of your potential profit for a product. To learn more about Amazon fees, check out Amazon’s guide here.